Barnett, William A. and Seck, Ousmane (2006): Rotterdam vs Almost Ideal Models: Will the Best Demand Specification Please Stand Up?

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Abstract
Among the many demand specifications in the literature, the Rotterdam model and the Almost Ideal Demand System (AIDS) have particularly long histories, have been highly developed, and are often applied in consumer demand systems modeling. Using Monte Carlo techniques, we seek to determine which model performs better in terms of its ability to recover the true elasticities of demand. We derive the correct formulae for the AIDS models elasticities, when the Törnqvist or two modified versions of the Stone index are used to linearize the model. The resulting linearized AIDS are compared to the full AIDS.
Item Type:  MPRA Paper 

Original Title:  Rotterdam vs Almost Ideal Models: Will the Best Demand Specification Please Stand Up? 
Language:  English 
Keywords:  Rotterdam Model; Almost Ideal Model; consumer demand system; Monte Carlo study; flexible functional forms 
Subjects:  C  Mathematical and Quantitative Methods > C3  Multiple or Simultaneous Equation Models ; Multiple Variables > C32  TimeSeries Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes ; State Space Models C  Mathematical and Quantitative Methods > C4  Econometric and Statistical Methods: Special Topics > C43  Index Numbers and Aggregation C  Mathematical and Quantitative Methods > C5  Econometric Modeling > C51  Model Construction and Estimation C  Mathematical and Quantitative Methods > C3  Multiple or Simultaneous Equation Models ; Multiple Variables E  Macroeconomics and Monetary Economics > E1  General Aggregative Models > E17  Forecasting and Simulation: Models and Applications 
Item ID:  417 
Depositing User:  William A. Barnett 
Date Deposited:  12. Oct 2006 
Last Modified:  13. Feb 2013 09:10 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/417 