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A Class of Demand Systems Satisfying Global Regularity and Having Complete Rank Flexibility

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  • Keith R. McLaren
  • Ou Yang

Abstract

A class of demand systems based on simple parametric specification of the indirect utility functions, but allowing for the parsimonious imposition of global regularity, is proposed. Demand systems in this class are completely flexible in rank, i.e., can be potentially specified to acquire as large a rank as required in empirical work. They also exhibit a clear and reasonable homothetic asymptotic behaviour. In an empirical application using Australian data, several examples from this class are estimated and compared with some popular alternatives in the literature.

Suggested Citation

  • Keith R. McLaren & Ou Yang, 2014. "A Class of Demand Systems Satisfying Global Regularity and Having Complete Rank Flexibility," Monash Econometrics and Business Statistics Working Papers 6/14, Monash University, Department of Econometrics and Business Statistics.
    • Handle: RePEc:msh:ebswps:2014-6
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    File URL: http://business.monash.edu/econometrics-and-business-statistics/research/publications/ebs/wp06-14.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Demand systems; Global regularity; Complete rank flexibility; Duality theory; Indirect utility function;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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