Rotterdam vs Almost Ideal Models: Will the Best Demand Specification Please Stand Up?

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Rotterdam Model; Almost Ideal Model; consumer demand system; Monte Carlo study; flexible functional forms (search for similar items in EconPapers)
JEL-codes: C3 C32 C43 C51 E17 (search for similar items in EconPapers)
Date: 2006-02-06
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Working Paper: Rotterdam vs Almost Ideal Models: Will the Best Demand Specification Please Stand Up? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:417

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