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Properties of the CDES Indirect Utility Functions and Demand Systems: Estimated by Survey Budget Data

In: The Elements and Dynamic Systems of Economic Growth and Trade Models

Author

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  • Bjarne S. Jensen

    (University of Southern Denmark (SDU))

Abstract

This chapter presents an empirical application of the basic indirect utility function of Houthakker-Hanoch—called the CDES specification (Constant Differences of Elasticities of Substitution). Global regularity restrictions are imposed and used in estimating the non-homothetic CDES preference parameters. Explicit calculations of income elasticities, Marshallian and Hicksian price elasticities and the Allen elasticities of substitution demonstrate the economic implications and flexibility of the derived globally regular demand systems. Our conjecture is that the structural parameters of CDES consumer demand are similarly robust and stable for many other countries in Europe and elsewhere. Also CDES can conveniently be applied in specifying CGE multi-sector growth models with a demand side satisfying observable historical Engel curve patterns.

Suggested Citation

  • Bjarne S. Jensen, 2025. "Properties of the CDES Indirect Utility Functions and Demand Systems: Estimated by Survey Budget Data," Springer Books, in: The Elements and Dynamic Systems of Economic Growth and Trade Models, edition 0, chapter 0, pages 155-195, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-52493-6_6
    DOI: 10.1007/978-3-031-52493-6_6
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