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The Differential Approach to Demand Analysis and the Rotterdam Model

Author

Listed:
  • William Barnett

    (Department of Economics, The University of Kansas)

  • Apostolos Serletis

    (Department of Economics, University of Calgary)

Abstract

This paper presents the differential approach to applied demand analysis. The demand systems of this approach are general, having coefficients which are not neces- sarily constant. We consider the Rotterdam parameterization of differential demand systems and derive the absolute and relative price versions of the Rotterdam model, due to Theil (1965) and Barten (1966). We address estimation issues and point out that, unlike most parametric and semi-nonparametric demand systems, the Rotterdam model is econometrically regular.

Suggested Citation

  • William Barnett & Apostolos Serletis, 2009. "The Differential Approach to Demand Analysis and the Rotterdam Model," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200902, University of Kansas, Department of Economics, revised Jan 2009.
    • Handle: RePEc:kan:wpaper:200902
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    File URL: http://www2.ku.edu/~kuwpaper/2009Papers/200902.pdf
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    References listed on IDEAS

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    2. William A. Barnett, 2000. "New Indices of Money Supply and the Flexible Laurent Demand System," Contributions to Economic Analysis, in: The Theory of Monetary Aggregation, pages 325-359, Emerald Group Publishing Limited.
    3. Diewert, W E & Wales, T J, 1988. "Normalized Quadratic Systems of Consumer Demand Functions," Journal of Business & Economic Statistics, American Statistical Association, vol. 6(3), pages 303-312, July.
    4. BARTEN, Anton P., 1969. "Maximum likelihood estimation of a complete system of demand equations," LIDAM Reprints CORE 34, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Barten, A. P., 1969. "Maximum likelihood estimation of a complete system of demand equations," European Economic Review, Elsevier, vol. 1(1), pages 7-73.
    6. Salam K. Fayyad, 1986. "A microeconomic system-wide approach to the estimation of the demand for money," Review, Federal Reserve Bank of St. Louis, issue Aug, pages 22-33.
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    8. Gallant, A. Ronald, 1981. "On the bias in flexible functional forms and an essentially unbiased form : The fourier flexible form," Journal of Econometrics, Elsevier, vol. 15(2), pages 211-245, February.
    9. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1975. "Transcendental Logarithmic Utility Functions," American Economic Review, American Economic Association, vol. 65(3), pages 367-383, June.
    10. Barnett, William A. & Serletis, Apostolos, 2008. "Consumer preferences and demand systems," Journal of Econometrics, Elsevier, vol. 147(2), pages 210-224, December.
    11. Ogaki, Masao, 1992. "Engel's Law and Cointegration," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 1027-1046, October.
    12. Barnett, William A. & Jonas, Andrew B., 1983. "The Muntz-Szatz demand system : An application of a globally well behaved series expansion," Economics Letters, Elsevier, vol. 11(4), pages 337-342.
    13. William A. Barnett & Ousmane Seck, 2008. "Rotterdam model versus almost ideal demand system: will the best specification please stand up?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(6), pages 795-824.
    14. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    15. R. P. Byron, 1970. "A Simple Method for Estimating Demand Systems under Separable Utility Assumptions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 37(2), pages 261-274.
    16. William A. Barnett & Jane Binner & W. Erwin Diewert, 2005. "Functional Structure and Approximation in Econometrics (book front matter)," Econometrics 0511006, University Library of Munich, Germany.
    17. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
    18. Arthur Lewbel & Serena Ng, 2005. "Demand Systems with Nonstationary Prices," The Review of Economics and Statistics, MIT Press, vol. 87(3), pages 479-494, August.
    19. BARTEN, Anton P., 1967. "Evidence on the Slutsky conditions for demand equations," LIDAM Reprints CORE 8, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    20. Diewert, W E, 1971. "An Application of the Shephard Duality Theorem: A Generalized Leontief Production Function," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 481-507, May-June.
    21. William A. Barnett, 1979. "Theoretical Foundations for the Rotterdam Model," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 46(1), pages 109-130.
    22. W.A. Barnett, 2004. "The Joint Allocation of Leisure and Goods Expenditure," Contributions to Economic Analysis, in: Functional Structure and Approximation in Econometrics, pages 41-73, Emerald Group Publishing Limited.
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    Cited by:

    1. Clements, Kenneth W. & Gao, Grace, 2015. "The Rotterdam demand model half a century on," Economic Modelling, Elsevier, vol. 49(C), pages 91-103.
    2. Lorenzo Sabatelli, 2016. "Relationship between the Uncompensated Price Elasticity and the Income Elasticity of Demand under Conditions of Additive Preferences," PLOS ONE, Public Library of Science, vol. 11(3), pages 1-11, March.
    3. Ignacio, Escañuela Romana, 2019. "The elasticities of passenger transport demand in the Northeast Corridor," Research in Transportation Economics, Elsevier, vol. 78(C).
    4. Barnett, William A. & Serletis, Apostolos, 2008. "Measuring Consumer Preferences and Estimating Demand Systems," MPRA Paper 12318, University Library of Munich, Germany.
    5. Sun, Changyou, 2014. "Recent growth in China's roundwood import and its global implications," Forest Policy and Economics, Elsevier, vol. 39(C), pages 43-53.

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    More about this item

    Keywords

    Diffrential demand systems; Theoretical regularity; Econometric regularity.;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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