testing for behavioral objective and aggregation opportunities in u s agricultural data to guide formulation of an aggregate model of u s agricultural production this paper reports nonparametric test results for both behavioral objective and aggregation level nonparametric tests are implemented as heuristics to determine empirical support for simplified analytical structures evidence does not refute the joint hypothesis that producers behave collectively as though they are a price taking profit maximizing firm with a convex technology subject to nonregressive technical change the empirical results also support exhaustive aggregation of input categories but much less aggregation of outputs this paper reports the first known implementation of the nonparametric homothetic separability tests

a globally flexible almost ideal demand system the almost ideal demand system is combined with the fourier expenditure system subject to the assumption that preferences are of the price independent generalized logarithmic class the resulting demand system has the desirable features of each of its components aggregate demand equations are consistent with preferences of a representative consumer and consistent estimates of elasticities are obtained for all observed prices application of the new demand system to u s consumption of meats and fish reveals that it fits the data well and that the restriction to the usual specification is rejected

the demand for assets through a low interest rate environment asset demand is important in many areas of economics to investigate this we estimate a globally flexible dynamic fourier asset demand specification and calculate morishima elasticities of substit

demand systems with nonstationary prices relative prices are nonstationary and standard root t inference is invalid for demand systems but demand systems are nonlinear functions of relative prices and standard methods for dealing with nonstationarity in linear models cannot be used demand system residuals are also frequently found to be highly persistent further complicating estimation and inference we propose a variant of the translog demand system the ntlog and an associated estimator that can be applied in the presence of nonstationary prices with possibly nonstationary errors the errors in the ntlog can be interpreted as random utility parameters the estimates have classical root t limiting distributions we also propose an explanation for the observed nonstationarity of aggregate demand errors based on aggregation of consumers with heterogeneous preferences in a slowly changing population estimates using u s data are provided

estimating theoretically consistent demand systems using cointegration techniques with application to greek food data abstract the use of time series techniques cointegration and error correction models has been offered as a potentially promising way in estimating demand systems that resolve the perennial issue of violating the theoretical postulates of homogeneity and symmetry the empirical results of this paper based on linearized aids and greek food data indicate that sample size aggregation schemes and model specification seem to be important factors in the estimation of a theoretically consistent demand system they also show that homogeneity is sensitive to sample size while symmetry is sensitive to the aggregation scheme adopted

erratum to balanced and unbalanced growth journal of development economics 53 1997 41 66 abstract a model is developed that shows how two sectors or regions interact out of steady state through product labor and capital markets and how if the former interaction dominates the growth of one sector pulls along the growth of the other while if the latter interactions dominate one sector or region booms while the other declines it is then shown why liberalization of foreign trade should lead to a transition from a lower to a higher steady state growth rate and why during the course of this transition growth might initially be even slower than before liberalization

price effects on compound commodities we examine the effect of simultaneous price changes on the total demand for a group of goods which we call a compound commodity specifically we consider unit and proportional cost components e g taxes transportation costs imposed on compound commodities if the unit cost is positive then the proportional cost raises the relative price of the more expensive good and thus induces substitution towards the less expensive good within this group then the substitution effect of the proportional cost for a compound commodity is non negative if and only if the compound commodity and the other goods are on average not strongly substitutable

possibilities for including the opportunity cost of time in recreation demand systems recreation demand modelers have attempted to identify and incorporate the opportunity cost of an individual s time in travel and on site in the model larson 1993b focused on the value of leisure time in a model where individuals face a fixed work week in this paper we examine the connection between labor supply and recreation demands and focus on conditional demand systems we illustrate that corner solution models are not needed to explain several interesting time related recreation issues

on behavioral complementarity and its implications we study the behavioral definition of complementary goods if the price of one good increases demand for a complementary good must decrease we obtain its full implications for observable demand behavior its testable implications and for the consumer s underlying preferences we characterize those data sets which can be generated by rational preferences exhibiting complementarities the class of preferences that generate demand complements has leontief and cobb douglas as its as extreme members

estimating a cointegrating demand system abstract the set of variables in a time series demand model in the form of the almost ideal demand system are found to be i 1 with the demand equations forming a cointegrating system the parameters of the cointegrating equations are estimated and tested using a triangular error correction procedure the null hypothesis of homogeneity with respect to prices and nominal income in the system cannot be rejected

money demand variability a demand systems approach this article tests the fourier flexible form on quarterly u s monetary data the data have been prescreened for consistency with the general axiom of revealed preference and subindexes are formed using the divisia approach in this article the global fourier model fits well although there is a potential problem of overfitting and certain data points exhibit behavior inconsistent with the model the elasticities are variable over time particularly around business cycle troughs it appears that financial asset demand surfaces are highly nonlinear and the many unsuccessful existing attempts to estimate money demand may not have worked well for this reason

utility functions and global regularity of fractional demand sytems fractional demand systems are utility derived demands having quantities or budget shares proportional to ag bf where g and f are functions of income and a and b vary across goods and are functions of prices many known demand systems that have large regular regions are fractional this paper derives the indirect utility functions that generate all fractional demand systems shows that these systems can all have large regular regions and provides sufficient conditions for their global or nearly global regularity an extension to rank three fractional demands is provided copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

european market integration for gas volume flexibility and political risk this is a copy of an article originally published by elsevier in energy economics see http www sciencedirect com science journal 03014215 2002 elsevier science b v

aggregation without separability tests of the united states and mexican agricultural production data the generalized composite commodity theorem gcct and testing procedure is extended to test for consistent aggregation of the united states and mexican agricultural production data in each category for which earlier tests rejected homothetic separability nonrejected gcct and separability hypotheses provide empirical support for aggregating all the united states agricultural outputs into as few as two categories crops and livestock mexican agricultural outputs also can be aggregated into as few as two categories support for aggregating all outputs into a single category is ambiguous in both countries and is only provided by the gcct

exports and labor demand searching for functional structure in multi output multi skill technologies to simplify the representation of a technological relationship between inputs and outputs a production unit s technology must typically satisfy some restrictive conditions some of them being well known in the literature this article presents new results for aggregating labor inputs and outputs in terms of restrictions on elasticities of scale and substitution these conditions are then empirically investigated in a framework that is flexible and does not lose its flexibility after separability being imposed the empirical findings of the exact approach to aggregation are found to be rather pessimistic on the possibility of providing a simplified representation

a cointegrated vecm demand system for meat in italy this article applies cointegration techniques to estimate a monthly demand system for meat in italy in contrast to existing studies where engle and granger s two step procedure and triangular vector error correction model tvecm representations are usually exploited it applies a cointegrated vector error correction model vecm where also prices and expenditure enter endogenously the system and the cointegration rank is not assumed to be known a priori but subject to inference it highlights some of the advantages of using the vecm compared to the tvecm including the possibility of testing the cointegration rank of the system and the weak and strong exogeneity of prices and expenditure within a well specified statistical model this may lead to remarkable improvements in the efficiency of parameters system estimates

characterizing some gorman engel curves this paper characterizes all utility derived demand systmes having engel curves that are linear in both income and an arbitrary function of income this class encompasses virtually all utility derived demand systems that have been estimated in the past using ag gregate data with explicit treatment of the problem of aggregation ac ross individuals it includes extensions of the piglog and pigl class es that have similar properties to these classes but allow for more general engel curve shapes this paper extends w m gorman s study o f these forms primarily by characterizing systems of rank two the ap plication of the characterized systems to problems of nesting separa bility flexibility engel curve analysis estimation and aggregatio n are briefly discussed copyright 1987 by the econometric society

variation in retail costs for fresh vegetables and salty snacks across communities in the united states abstract households living in different communities pay different amounts of money for food food costs depend on whether a household lives in an urban community or in a locality with a high incidence of poverty among other factors this study focuses on spatial variation across the united states in the retail costs for fresh vegetables and salty snacks findings reveal that the major economic and demographic characteristics of a household s community affect its costs for these two types of foods differently however households are likely to pay more money for salty snacks in communities where fresh vegetables also cost more

equivalence scales in a rank 3 demand system abstract in the context of a rank 3 demand system equivalence scales measuring the cost of demographic characteristics independently of the base utility level can be identified from cross section data without demographic separability restrictions although this can also be achieved with a rank 2 demand system that contains a nonlinear log expenditure term in its budget shares tests performed in a nested framework suggest that the rank 3 demand system approach is empirically superior the informative structure of the rank 3 demand system is used to estimate a detailed pattern of demographic costs including the cost of single parenthood and economies of scale within the family

duality theory for variable costs in joint production duality methods for incomplete systems of consumer demand equations are adapted to the dual structure of variable cost functions in joint production this allows identification of necessary and sufficient restrictions on technology and cost so that con ditional factor demands can be written as functions of input prices fixed inputs and cost these are observable when variable inputs are chosen and committed to production hence the identified restrictions allow ex ante conditional demands to be studied using observable data this class of production technologies is consistent with all von neu mann morgenstern utility functions when ex post production and or output prices are un certain

non parametric tests of consumer behaviour the neoclassical model of consumer behaviour postulates that a consumer s choice behaviour can be described as deriving from utility maximization subject to a budget constraint one is then naturally led to ask what this model implies about observed behaviour this question has been addressed from two quite distinct approaches the first approach originating in the work of slutsky 1915 and antonelli 1886 derives necessary and sufficient conditions involving the derivatives of the demand functions the second approach originating in the work of samuelson 1938 1947 1948 derives algebraic conditions on the demand functions implied by maximizing behaviour

an empirical comparison of flexible demand system functional forms this paper compares the performance of eight frequently used flexible forms that are either 1 locally flexible 2 effectively globally regular or 3 asymptotically globally flexible results show that the functions with global properties generally perform better particularly those models having asymptotic properties results using us consumption data indicate substitutability among the components of consumption at most data points there is also some interesting substitution volatility around the time of recessions in the usa copyright 2001 john wiley sons ltd

how to reform a planned economy lessons from china the countries of eastern europe and the former soviet union have been flooded with advice from the west on how to liberalize their planned econo mies this advice is unfortunately offered in an empirical vacuum no one knows how these econo mies will react to the proposed liberalization meas ures there exists however a neglected source of information china offers a long time series of data over a decade s worth on the effects of reforms on a planned economy china s reforms were gradual but their cumulative effect has been large and they have been remarkably successful china s experiments provide some practical les sons on what kinds of reforms can work elsewhere the dominant school of thought among economists favours the big bang policy of reforming quickly and according to a comprehensive plan partial reforms in this view are useless they will be negated by the remnants of the planning system the proponents of big bang reform have been influential with poland czechoslovakia and rus sia announcing plans for a rapid transition to capi talism

bias in estimating the almost ideal demand system with the stone index approximation this paper shows that the commonly used stone index approximation can bias the parameter estimates of the almost ideal demand system the bias mostly affects the price parameters and can be more serious when the budget share equations are estimated with individual household rather than aggregate data in the absence of strong substitution effects the price parameter bias can be largely corrected through simple reparameterization copyright 1993 by royal economic society

demand systems with and without errors revealed preference theory assumes that each consumer has demands that are rational meaning that they arise from the maximization of his or her own utility function in contrast econometric or statistical demand models assume that each consumer s demands equal a rational systematic component derived from a common utility function plus an individual specific additive error term this paper reconciles these differences by providing necessary and sufficient conditions for rationality of statistical demand models given individual consumer rationality

time varying intercepts and equilibrium analysis an extension of the dynamic almost ideal demand model demographic effects and user costs in demand systems have usually been modelled explicitly a more robust approach is a state space formulation of the demand system where time varying intercepts account for the effects of unobservable variables the author embeds such a system in a vector autoregressive distributed lag model with a bayesian hierarchical prior the model is estimated by a markov chain monte carlo method on samples involving quarterly us and uk data in the us case the results are compared with a previously published cointegration analysis of the same data copyright 2002 john wiley sons ltd

empirical modelling of the aggregation error in the representative consumer model this paper examines different approaches to modelling the aggregation error associated with the representative consumer model each approach is based on an analytical framework intended for modelling aggregate time series data on quantities and prices with potential additional measures of income distribution simple functions that track aggregation error over time are found to perform better than more complex and theoretically sophisticated models an explanation is given based on typical time series characteristics of economic data

aggregation without separability composite commodity theorems in quantity space abstract in this paper we provide an obvious extension of the composite commodity theorems to the case of inverse demands where quantities and not prices can be used for aggregation first the hicks leontief commodity theorem is extended to the quantity space and then its generalised stochastic version is presented

unobserved preference heterogeneity in demand using generalized random coefficients we model unobserved preference heterogeneity in demand systems via random barten scales in utility functions these barten scales appear as random coefficients multiplying prices in demand functions consumer demands are nonlinear in prices and may have unknown functional structure we therefore prove identification of generalized random coefficients models defined as nonparametric regressions where each regressor is multiplied by an unobserved random coefficient having an unknown distribution using canadian data we estimate energy demand functions with and without random coefficient barten scales we find that not accounting for this unobserved preference heterogeneity substantially biases estimated consumer surplus costs of an energy tax jel codes c14 d12 d13 c21 keywords unobserved heterogeneity nonseparable errors random utility parameters random coefficients equivalence scales consumer surplus welfare calculations the authors wish to thank jinyong hahn richard blundell stefan hoderlein rosa matzkin and anonymous referees for helpful discussions and suggestions earlier versions of this paper were circulated under the

are consumption and government expenditures substitutes or complements morishima elasticity estimates from the fourier flexible form 1 introduction macroeconomists paid relatively little attention to the economic effects of government expenditures and to alternative methods of financing those expenditures until barro 1974 1979 1981 challenged conventional views on the economic impact of government activity much of the literature stimulated by these studies addressed the effects of alternative financing methods for a given path of government expenditures but barro 1981 also stressed the fact that government expenditures can provide direct welfare to economic agents and that variations in the level of government expenditures may have an impact on the consumption decisions of households as a result many studies estimate the extent to which economic agents treat government expenditures as substitutes to or complements with private consumption expenditures e g kormendi 1983 aschauer 1985 graham and himarios 1991 ni 1995 the degree of substitution or complementarity between private consumption and government expenditures is of crucial importance in assessing the impact of fiscal policies on economic welfare thus it is important to establish the extent to which federal expenditures and private consumption are substitutes or complements as a guide to the design of fiscal policies there is much disagreement about the extent to which consumption and government expenditures are substitutes or complements in use for economic agents 1 studies differ in their details so it is difficult to know what might account for such diverse results but it seems fair to say that the relationship between government expenditures and consumption is largely an open question the diversity of the results however may be a consequence of a number of restrictive assumptions that have been used in various studies many of these assumptions appear hard to justify a priori studies typically estimate the parameters of an equation containing private consumption and government expenditures often assuming that the relevant choice variable for the representative household is an aggregate consumption measure given by the sum of nondurables and services consumption e g aschauer 1985 reid 1985 bean 1986 campbell and mankiw 1990 or the sum of nondurables services and the service flow from durable goods e g kormendi 1983 graham and himarios 1991 this implies that each component of private consumption expenditures is a perfect substitute for the household an assumption for which there is no compelling theoretical basis similarly government expenditures defense nondefense and state and local are typically aggregated e g feldstein 1982 aschauer 1985 reid 1985 graham 1993 with various studies excluding either federal or state and local expenditures just as for private consumption expenditures these aggregation assumptions should be tested rather t han simply imposed in applied work in addition although substitution elasticities are generally not constant in an optimizing framework they are often assumed to be constant in applications by using a single aggregate of consumption or a utility function that imposes a constant elasticity of substitution e g aschauer 1985 and ni 1995 finally none of the above mentioned studies computes elasticities of substitution in a manner consistent with microeconomic utility maximization principles 2 in this article we provide estimates of elasticities of substitution between consumption and government expenditures based on the demand systems approach that has been widely used in testing the neoclassical theory of household behavior see eg deaton and muellbauer 1980 and the survey of barnett et al 1992 this approach has a number of attractive features making it a substantial improvement over the applied studies available in the macroeconomics literature the estimates in this article are based on an optimizing framework where both government and consumption expenditures are treated as choice variables by the representative household

latent separability grouping goods without weak separability this paper develops a new concept of separability with overlapping groups latent separability this is shown to provide a useful empirical and theoretical framework for investigating the grouping of goods and prices it is a generalization of weak separability in which goods are allowed to enter more than one group and where the composition of groups is identified by the choice of group specific exclusive goods latent separability is shown to be equivalent to weak separability in latent rather than purchased goods and provides a relationship between separability and household production theory for the popular class of linear almost ideal and translog demand models and their generalizations we provide a method for choosing the number of homothetic separable groups a detailed method for exploring the composition of the separable groups is also presented these methods are applied to a long time series of british individual household data on the consumption of twenty two nondurable and service goods

an inverse demand analysis with introduction of quality effects an application to spanish consumption of fruit and vegetables this article analyzes consumer preference for fruit and vegetables when by using time series with socioeconomic characteristics of households there can be seemingly unobserved quality effects which are increased by aggregation the changes in spanish demand for fresh and processed fruit and vegetables over the period 1987 2000 are discussed following previous tests and analyses quantities are taken as predetermined and prices as matching the offer conditions thus quality effects based on the nutritional and or health value of the product are estimated from the error terms associated with the functions of the unit values quality variables are introduced as taste shifters in the inverse demand system laitinen theil model the results show the positive effects of quality differences on the normalized price for the group of products through own quality flexibilities and the negative effects between fresh and processed products through cross quality flexibilities

aggregation without separability a generalized composite commodity theorem this paper provides general conditions for aggregating commodities without separable utility these conditions impose weaker and more empirically plausible restrictions on price movements than the currently existing alternative to separability the hicks leontief composite commodity theorem the idea is to allow departures from hicks leontief that take the form of well behaved error terms utility functions that permit generalized composite commodity aggregation include the aids model the translog all homothetic utility functions and any utility function when demands are aggregated to two groups of goods implications of empirical nonstationarity of relative prices for aggregation and demand estimation are considered copyright 1996 by american economic association

simple tests of distributional effects on macroeconomic equations the presence of distributional effects in macroeconomic equations is shown to coincide with nonlinearity in micro behavioral relationships parameters estimated with aggregate data as in representative agent models contain distributional biases that are not measurable using aggregate data alone tests for distributional effects and other measures of the extent of aggregation problems are derived using distributional data observed over time significant distributional effects are noted for a model of annual aggregate u s commodity expenditure data a static model that accommodates individual heterogeneity is found to be statistically equivalent to a simply dynamic model that accommodates first order autocorrelation

a system of demand equations satisfying effectively global regularity conditions a parametric specification of an indirect utility function in terms oaf expenditure and two unit cost functions is proposed specification of these unit cost functions in terms of regular functions leads to the notion of an effectively globally regular system of demand equations that is a system of demand equations that is regular over a cone in expenditure price space and for which the regular region includes all points in any given sample and all values of nominal expenditure and prices generating higher values of real expenditure than the sample minimum this general model nests a number of popular demand systems such as the linear expenditure system as special cases an empirical application illustrates some of these ideas copyright 1996 by mit press

trade liberalization and agricultural chemical use united states and mexico to anticipate the likely effects of recent trade agreements with mexico on the environment and food safety this paper examines changes in agricultural chemical use econometric estimation and simulation suggest that the combined effects of the north american free trade agreement nafta economic growth research investment and farm policy are expected to increase chemical usage substantially in the united states and undoubtedly lead to greater groundwater contamination in mexico the expected effects are a substantial increase in fertilizer use but a decrease in pesticide use increases in private research investment are expected to increase the use of both types of chemicals but increases in public research investment in the united states are not

causality in demand a co integrated demand system for trout in germany this article focuses on causality in demand a methodology where causality is imposed and tested within an empirical co integrated demand model not prespecified is suggested the methodology allows different causality of different products within the same demand system the methodology is applied to fish demand on the german market for farmed trout and substitutes it is found that supply sources i e aquaculture and fishery are not the only determinant of causality storing tightness of management and aggregation level of integrated markets might also be important the methodological implication is that more explicit focus on causality in demand analyses provides improved information the results suggest that frozen trout forms part of a large european whitefish market where prices of fresh trout are formed on a relatively separate market redfish is a substitute on both markets the policy implication is that increased production of trout causes a downward pressure on fresh trout prices but froz

international evidence on aggregate short run and long run interfuel substitution in this paper we build on recent work by serletis et al 2010 in press and report short and long run estimates of aggregate interfuel substitution for a number of oecd and non oecd countries in doing so we use recent pooled intercountry data since 1980 and state of the art advances in microeconometrics including duality theory and flexible functional forms also motivated by the widespread practice in the empirical energy demand literature of ignoring theoretical regularity we estimate our model subject to global curvature but not monotonicity using methods developed by diewert and wales 1987 we provide inference and also a policy perspective using parameter estimates that are consistent with the theoretical regularity conditions of neoclassical microeconomic theory

the role of theoretical restrictions in forecasting with inverse demand models in recent years the theoretical restrictions of consumer demand have been examined in post sample forecasting exercises however this work has uniformly ignored the concavity restrictions of consumer demand in this paper we evaluate a series of normalized quadratic inverse demand system nqids specifications using rolling windows and generating one to four step ahead forecasts to estimate the models eleven categories of south atlantic fish are used from 1980 through 2001 in addition to the nqids we also examine the forecasting performance of a purely time series model we find that the best predictions are achieved using a composite forecast

size distortions of tests of the null hypothesis of stationarity evidence and implications for the ppp debate abstract tests of the null hypothesis of stationarity against the unit root alternative play an increasingly important role in empirical work in macroeconomics and in international finance we show that the use of conventional asymptotic critical values for stationarity tests may cause extreme size distortions if the model under the null hypothesis is highly persistent this fact calls into question the use of these tests in empirical work we illustrate the practical importance of this point for tests of long run purchasing power parity ppp under the recent float we show that the common practice of viewing tests of stationarity as complementary to tests of the unit root null will tend to result in contradictions and in spurious rejections of long run ppp while the size distortions may be overcome by the use of finite sample critical values the resulting tests tend to have low power under economically plausible assumptions about the half life of deviations from ppp thus the fact that stationarity is not rejected cannot be interpreted as convincing evidence in favor of mean reversion only in the rare case that stationarity is rejected do size corrected tests shed light on the question of long run ppp

aggregation of data and profit maximization in mexican agriculture nonparametric support for two important hypotheses relevant to econometric model specification is examined results of various nonparametric tests for behavioural objective and aggregation level of mexican agricultural production data are reported the evidence does not refute the hypothesis that producers behave collectively as though they are a price taking profit maximizing firm the empirical results also support exhaustive aggregation of input categories aggregation possibilities among outputs are fewer and are highly sensitive to the rejection criterion

translog flexible functional forms and substitutability of monetary assets this article attempts to establish the nature of the relationship between monetary assets by estimating a sequence of four nested demand systems the generalized translog the basic translog the linear translog and the homothetic translog the principal attraction of the empirical work is that i am able to test separately for both homothetic and quasi homothetic preferences over monetary assets the tests reject both homotheticity and quasi homotheticity and thus consistency of the strotz gorman two stage optimization i also perform tests on economic theory to establish whether the parameter estimates are consistent with the utility maximizing hypothesis underlying the models these tests indicate that the generalized translog is the preferred model

intellectual property rights and quality improvement this paper explores why theories about the effects of intellectual property rights ipr protection on foreign direct investment fdi and innovation have reached mixed conclusions in our model northern firms innovate to improve the quality of existing products and may later shift production to the south through fdi southern firms may then imitate the products of multinationals we find that imitation can increase fdi and innovation for quality improvements whereas the opposite occurs when innovators develop new varieties hence stronger ipr protection by reducing imitation may shift innovation away from improvements in existing products toward development of new products

the inverse imported factor demand system in thailand a cointegration analysis abstract in this paper we derive an inverse input demand system and apply cointegration analysis to the imported factor demand of thai industry we found one cointegrating vector and six common stochastic trends all short run flexibilities are less than one

curvature restrictions on flexible functional forms an application of the minflex laurent almost ideal demand system to the pattern of spanish demand 1954 1987 this article introduces a new demand model labeled minflex laurent almost ideal demand system which has been achieved by combining the flexible functional minflex laurent form with the price independent generalized logarithm expenditures structure introduced by muellbauer the model has been applied to analyze the aggregate demand behavior of final consumer goods in the spanish economy from 1954 to 1987 when the flexible functional form has been empirically tested the curvature requirements imposed by economic theory have been studied

the sale of alcohol in denmark recent developments and dependencies on prices taxes how do prices affect the choice of types of alcohol in denmark we study the danish sale of alcoholic beverages in a time series framework first we look at annual data from 1980 investigating the hypothesis of a fairly stable level of sales we conclude stationarity of sales and we also find that the income elasticity of total sales has been zero second we analyse the composition of the alcohol sale between beer wine and spirits in a multivariate model conditional on the development in prices for this analysis we use johansen cointegration techniques again we test that income can be omitted from the model and we use the model to derive the effects on the composition of alcohol sales of three different sets of changes in the alcohol taxation

the effects of price aggregation bias in systems of demand equations this article illustrates the importance of maintaining consistent levels of aggregation between prices and quantities when estimating consumer demand functions the impact of violating this condition is quantified by using summary performance measures and estimates of demand elasticity biases results derived from an application of 1972 1973 consumer expenditure survey data and supported with a quasi monte carlo experiment consistently indicate that the point estimates of demand elasticities are significantly biased thus the study indicates the importance of developing and maintaining price indexes disaggregated to the same level as the expenditure data in consumer expenditure and budget surveys

flexible and semiflexible consumer demands with quadratic engel curves in this paper we introduce three flexible consumer demand systems in which expenditures on goods are quadratic functions of income we view these alternatives as to the demand systems used heretofore in the empirical modeling of rank three demands namely those in which expenditure shares are quadratic functions of the logarithm of income curvature conditions required by theory can be imposed locally during the estimation for each and a semiflexible version can be estimated for illustrative purposes we estimate various forms of two of the systems using canadian data on seven categories of goods for the period 1947 to 1995

the impact of public policies on innovation and imitation the role of r d technology in growth models it has been shown under the assumption of linear r d technology that a government subsidy to imitative innovative r d decreases increases imitative effort but increases decreases innovative effort and that strengthening the enforcement of patent laws leads to a decrease in innovative r d but to an increase in imitative r d by replacing the linear r d technology with a sufficiently convex r d technology we have shown that the counter intuitive results are reversed in the case of linear r d technology the socially optimal r d policies and activities are indeterminate but with convex r d technology optimal innovation and imitation subsidies would induce the market to generate socially balanced innovative and imitative activities

testing for homogeneity in demand systems when the regressors are nonstationary an implication of optimizing theory is that demand functions are homogeneous of degree zero in prices and nominal income evidence based on estimations of demand systems has repeatedly found this restriction to be rejected by the data however the hypothesis is often formulated in terms of regressors that are non stationary this paper re examines the evidence for homogeneity in light of recent developments in time series econometrics with special emphasis on the treatment of trends we find the demand system to be stochastically but not deterministically cointegrated using techniques developed for estimating cointegrating vectors in the presence of deterministic trends we re estimate the demand system and find that homogeneity holds in many cases

aggregation of price risk over commodities an economic index number approach this article extends the economic theory of index numbers to the aggregation of price risk over commodities in production superlative indexes of aggregate price risk are related to tornqvist and fisher type output quantity indexes an application to major crops in manitoba illustrates the empirical importance of the analysis

valuing resource access with seminonparametric techniques an application to clear lake the focus of this investigation is three fold first seminonparametric techniques are considered in order to avoid the pitfall of imparting bias on value estimates second the efficacy of seminonparametric techniques are explored in an empirical setting by valuing recreational access at clear lake iowa finally a technique from eastwood and gallant 1991 is adapted and applied to the count data model

competition between farmed and wild salmon the japanese salmon market this article examines the japanese market for salmon this market is of interest since it is the largest and most diversified salmon market in the world with wild and farmed species from europe and south and north america competing in the same market in contrast to the european union eu and u s markets there have been neither trade conflicts nor trade restrictions the japanese market can hence provide information about the impact of bringing substantial quantities of a new product into a market and the effect of large scale aquaculture on traditional fisheries in this article market integration between wild and farmed salmon on the japanese market is examined using both bivariate and multivariate cointegration analysis tests for the law of one price are also conducted the results indicate that the species are close substitutes on the market and that the expansion of farmed salmon has resulted in price decreases for all salmon species

additive general error models for production cost and derived demand or share systems many empirical studies of production specify a deterministic model of the firm derive the implied behavioral equations input demand or share system and then embed this system in a stochastic framework by tacking on linear error terms in contrast this paper proposes general error models gems in which the error specification is an integral part of the optimization model these models are the statistical embodiment of stigler s view that apparent observed inefficiencies reflect the investigator s ignorance of the true optimization problem additive gems are proposed and interpreted specification tests indicate that a translog additive gem is superior to the standard translog specification

non stationarity and the import demand for virgin olive oil in the european union the aim of this study is to analyse the importation of virgin olive oil to european union countries paying special attention to the spanish export contribution the method used is based on the estimation of an imports demand system the novelty of the paper lies not in the modelling approach but in the explicit consideration of the univariate characteristics of series that is included in the analysis since prices are non stationary cointegration among them has been tested results indicate that they are cointegrated and that homogeneity holds as a result relative prices are included in the imports demand system structural change is also considered so as to account for the entrance of both spain and greece into the eu during the period studied results demonstrate the leadership of spain within the eu virgin olive oil market as well as the increasing competitiveness of greek oil

the generalized composite commodity theorem and food demand estimation this article reports tests of aggregation over consumer food products and estimates of aggregate food demand elasticities evidence that food demand variables follow unit root processes leads us to build on and simplify existing tests of the generalized composite commodity theorem we compute food demand elasticities using a method of cointegration that is shown to apply to a convenient but nonlinear functional form estimates are based on consumer reported expenditure data rather than commercial disappearance data appropriately specified models of consumer demand are central to market analysis it has been established that a valid equilibrium for markets characterized by diverse firms or diverse consumer products depends on downward sloping composite demand curves heiner braulke wohlgenant or on valid indirect utility functions chavas and cox given the large number of consumer food products food demand and price analysis must be implemented at some level of product aggregation improper aggregation can lead to biased estimates of welfare loss associated with public policies biased estimates of consumer and derived demand elasticities and misleading tests of market power testing for consistent aggregation over food products and estimating aggregate consumer food demand elasticities are the subjects of this article by far the most common justification for aggregation has been separable preferences one reason for its popularity has been the lack of a viable alternative tests of the composite commodity theorem hicks leontief lewbel are always rejected because it restricts relative prices within a group to remain fixed over time on the other hand aggregation based on weak separability is often rejected diewert and wales eales and unnevehr

hicksian separability does not hold over space implications for the design of household surveys and price questionnaires abstract if relative prices of goods within a commodity group are constant hicksian separability lets the price of a single good represent the group price level this is relied on by price questionnaires used with household surveys in developing countries and when constructing temporal and spatial deflators methods of estimating demand systems from household survey data also rely on hicksian separability yet this restriction remains untested in cross sections we use unique data from vietnam with multiple specifications from within the same food groups to test if within group relative prices are constant over space the data firmly reject these restrictions some guidelines for survey design are discussed in terms of the characteristics of commodity groups that should be disaggregated and those that should have more elementary goods added to their linked price questionnaire

new indices of money supply and the flexible laurent demand system the article begins by surveying the existing results on the new divisia monetary aggregates charts display the differences in behavior between the divisia aggregates and the federal reserve s official simple sum monetary aggregates the article then compares system wide fit for the simple sum and divisia monetary aggregates when used as data in the joint estimation of a system of demand equations the demand system is derived from a new laurent expansion approximation to the reciprocal indirect utility function the laurent expansion provides a better behaved remainder term than that of the more commonly used taylor series the results favor the divisia aggregates

how significant are externalities for development if one man starts a new idea it is taken up by others and combined with suggestions of their own and thus it becomes the source of further new ideas and presently subsidiary trades grow up in the neighbourhood supplying it with implements and materials marshall 1920 p 225

resource rent in individual quota fisheries traditional fisheries management schemes generate incentives for vessels to maximize catch resulting in rent dissipation and overcapacity individual vessel quota management schemes change the incentives to maximize profit and have the potential to generate resource rent and reduce capacity an interesting question is whether it is the changed incentives due to individual quota or the capacity reduction due to transferability of individual quota that is most important in generating rent in this study a cost function approach is used to model and measure rent generated and potential rent in a fishery managed with individual vessel quotas

innovation and wage effects of international outsourcing abstract we investigate the effects of increased outsourcing of production to a low wage country such international outsourcing lowers the marginal cost of production and thus increases profits creating greater incentives for innovation a reduction in the resource requirement in adapting technology relative to improving products or an expansion in the portion of production that can be outsourced generates a greater extent of international outsourcing a lower relative wage and a faster rate of innovation an increase in production taxes in the north production subsidies in the south or a subsidy to adapting technologies has similar effects

agricultural trade restrictiveness in the european union and the united states the article provides a summary measure of the uruguay round tariff reduction commitments in the european union and the united states using the mercantilistic trade restrictiveness index mtri as the tariff aggregator we compute the index for agricultural commodity aggregates assuming a specific constant elasticity of substitution functional form for import demand the levels of the mtri under the actual commitments of the uruguay round are computed and compared with two hypothetical cases a deeper cut in higher tariffs and a uniform reduction of each tariff both leading to the same average reduction as in the uruguay round this makes it possible to infer how reducing tariff dispersion will help improve market access in future trade agreements and provides some guidelines for aggregating detailed tariffs in trade models

evaluating the linearized almost ideal demand system linearizing the almost ideal demand system laids by recourse to the stone share weighted price index is common practice two issues are addressed here first scrutiny of the errors in variables implications of the linearization reveals that not only is the sur estimator inconsistent but a consistent iv estimator cannot be constructed second some alternatives to the green alston elasticities specifically designed for the laids model are developed but neither these nor the green alston elasticities are found to have any advantages over the conventional elasticity formulae some errors in the green alston 1990 paper are corrected the inconsistency and elasticity issues are documented by a monte carlo investigation

quadratic engel curves and consumer demand this paper presents a model of consumer demand that is consistent with the observed expenditure patterns of individual consumers in a long time series of expenditure surveys and is also able to provide a detailed welfare analysis of shifts in relative prices a nonparametric analysis of consumer expenditure patterns suggests that engel curves require quadratic terms in the logarithm of expenditure while popular models of demand such as the translog or the almost ideal demand systems do allow flexible price responses within a theoretically coherent structure they have expenditure share engel curves that are linear in the logarithm of total expenditure we derive the complete class of integrable quadratic logarithmic expenditure share systems a specification from this class is estimated on a large pooled data set of u k households models that fail to account for engel curvature are found ro generate important distortions in the patterns of welfare losses associated with a tax increase

the dynamics of real asset prices the real exchange rate trade reforms and foreign capital inflows abstract this paper explores the dynamics of real asset prices in chile in the last 15 years in a framework where a central role is played by the real exchange rate tariffs and foreign capital inflows working with time series models the real prices of land capital stocks and housing the empirical results show that at a time when structural reforms took place 1976 1982 including a trade liberalization tariffs contributed significantly to explain the real price of land while macroeconomic conditions were dominated by foreign capital inflows after 1982 the real exchange rate plays a key role in many respects

monetary policy and monetary asset substitution abstract this paper shows that changing the target federal funds rate induces changes in relative user costs of monetary assets estimated morishima elasticities of substitution from the fourier flexible form reveal greater substitution from transactions assets and savings deposits into small time deposits than into retail money market mutual funds

the use of conditional cost functions to generate estimable mixed demand systems mixed demand systems have been virtually ignored in empirical work solely because derivation of these systems requires closed forms for both direct and indirect utility functions this article proposes the alternative of using a conditional cost function to generate empirical mixed demand models this approach allows the estimation of mixed demand systems which are explicit in an unobservable variable utility but may lack a closed form representation in terms of observable variables such as prices quantities and expenditure results indicate that this approach is operationally feasible which opens up a wider range of mixed demand specifications in static analyses