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Stone-Geary Meets CES: An Extended Linear Expenditure System

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  • Ferran Sancho

Abstract

We reformulate the Stone-Geary utility function to incorporate non-unitary elasticities of substitution. We show that this extended linear expenditure system includes the standard Stone-Geary case but eliminates some of its restrictions. In particular, and most significantly, the proportions of expenditure over leftover income become price responsive under the extended demand system.

Suggested Citation

  • Ferran Sancho, 2022. "Stone-Geary Meets CES: An Extended Linear Expenditure System," Working Papers 1328, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:1328
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    References listed on IDEAS

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    1. Sébastien Lecocq & Jean-Marc Robin, 2006. "Estimating Demand Response with Panel Data," Empirical Economics, Springer, vol. 31(4), pages 1043-1060, November.
    2. Shoven, John B & Whalley, John, 1984. "Applied General-Equilibrium Models of Taxation and International Trade: An Introduction and Survey," Journal of Economic Literature, American Economic Association, vol. 22(3), pages 1007-1051, September.
    3. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, January.
    4. Javier García-Enríquez & Cruz A. Echevarría, 2016. "Consistent Estimation of a Censored Demand System and Welfare Analysis: The 2012 VAT Reform in Spain," Journal of Agricultural Economics, Wiley Blackwell, vol. 67(2), pages 324-347, June.
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    More about this item

    Keywords

    linear expenditure system; constant elasticity of substitution; calibrated demand functions;
    All these keywords.

    JEL classification:

    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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