[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/ags/pugtwp/331575.html
   My bibliography  Save this paper

Estimating censored and non homothetic demand systems: the generalized maximum entropy approach

Author

Listed:
  • Femenia, Fabienne
  • Gohin, Alexandre
Abstract
The econometric estimation of zero censored demand system faces major difficulties. The virtual price approach pioneered by Lee and Pitt in an econometric framework is theoretically consistent but empirically feasible only for homothetic demand system and even may fail to converge depending on initial conditions. In this paper we propose to expand on this approach by relying on the generalized maximum entropy concept instead of the Maximum Likelihood paradigm. The former is robust to the error distribution while the latter must stick with a normality assumption. Accordingly the econometric specification of censored demand systems with virtual prices is made easier even with non homothetic preferences defined over several goods. Illustrative Monte Carlo sampling results show its relative performance.

Suggested Citation

  • Femenia, Fabienne & Gohin, Alexandre, 2007. "Estimating censored and non homothetic demand systems: the generalized maximum entropy approach," Conference papers 331575, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331575
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/331575/files/3286.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Soest, Arthur van & Kapteyn, Arie & Kooreman, Peter, 1993. "Coherency and regularity of demand systems with equality and inequality constraints," Journal of Econometrics, Elsevier, vol. 57(1-3), pages 161-188.
    2. Antoine Bouët & Lionel Fontagné & Sébastien Jean, 2005. "Is Erosion of Tariff Preferences a Serious Concern?," Working Papers 2005-14, CEPII research center.
    3. Van Soest, Arthur & Kooreman, Peter, 1990. "Coherency of the indirect translog demand system with binding nonnegativity constraints," Journal of Econometrics, Elsevier, vol. 44(3), pages 391-400, June.
    4. Steven T. Yen & Biing-Hwan Lin, 2006. "A Sample Selection Approach to Censored Demand Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(3), pages 742-749.
    5. Jon Haveman & David Hummels, 2004. "Alternative hypotheses and the volume of trade: the gravity equation and the extent of specialization," Canadian Journal of Economics, Canadian Economics Association, vol. 37(1), pages 199-218, February.
    6. Mustafizur Rahman & Wasel Bin Shadat, 2005. "NAMA Negotiations in the WTO and Preference Erosion: Concerns of Bangladesh and Other Regional LDCs," CPD Working Paper 51, Centre for Policy Dialogue (CPD).
    7. William A. Barnett, 2004. "Tastes and Technology: Curvature Is Not Sufficient for Regularity," Contributions to Economic Analysis, in: Functional Structure and Approximation in Econometrics, pages 429-433, Emerald Group Publishing Limited.
    8. Gallant, A. Ronald & Golub, Gene H., 1984. "Imposing curvature restrictions on flexible functional forms," Journal of Econometrics, Elsevier, vol. 26(3), pages 295-321, December.
    9. Joseph Francois & Bernard Hoekman & Miriam Manchin, 2006. "Preference Erosion and Multilateral Trade Liberalization," The World Bank Economic Review, World Bank, vol. 20(2), pages 197-216.
    10. Golan, Amos & Judge, George & Perloff, Jeffrey, 1997. "Estimation and inference with censored and ordered multinomial response data," Journal of Econometrics, Elsevier, vol. 79(1), pages 23-51, July.
    11. Wales, T. J. & Woodland, A. D., 1983. "Estimation of consumer demand systems with binding non-negativity constraints," Journal of Econometrics, Elsevier, vol. 21(3), pages 263-285, April.
    12. William Barnett & Meenakshi Pasupathy, 2003. "Regularity of the Generalized Quadratic Production Model: A Counterexample," Econometric Reviews, Taylor & Francis Journals, vol. 22(2), pages 135-154.
    13. Low, Patrick & Piermartini, Roberta & Richtering, Jurgen, 2005. "Multilateral solutions to the erosion of non-reciprocal preferences in NAMA," WTO Staff Working Papers ERSD-2005-05, World Trade Organization (WTO), Economic Research and Statistics Division.
    14. van Akkeren, Marco & Judge, George & Mittelhammer, Ron, 2002. "Generalized moment based estimation and inference," Journal of Econometrics, Elsevier, vol. 107(1-2), pages 127-148, March.
    15. Golan, Amos & Judge, George G. & Miller, Douglas, 1996. "Maximum Entropy Econometrics," Staff General Research Papers Archive 1488, Iowa State University, Department of Economics.
    16. Lee, Lung-Fei & Pitt, Mark M, 1986. "Microeconometric Demand Systems with Binding Nonnegativity Constraints: The Dual Approach," Econometrica, Econometric Society, vol. 54(5), pages 1237-1242, September.
    17. Romer, Paul, 1994. "New goods, old theory, and the welfare costs of trade restrictions," Journal of Development Economics, Elsevier, vol. 43(1), pages 5-38, February.
    18. Neary, J. P. & Roberts, K. W. S., 1980. "The theory of household behaviour under rationing," European Economic Review, Elsevier, vol. 13(1), pages 25-42, January.
    19. Mustafizur Rahman & Wasel Bin Shadat, 2006. "NAMA Negotiations in the WTO and Preference Erosion," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 7(2), pages 179-203, September.
    20. Channing Arndt & Songquan Liu & Paul Preckel, 1999. "On dual approaches to demand systems estimation in the presence of binding quantity constraints," Applied Economics, Taylor & Francis Journals, vol. 31(8), pages 999-1008.
    21. Moschini, Giancarlo, 1999. "Imposing Local Curvature Conditions in Flexible Demand Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(4), pages 487-490, October.
    22. Fuss, Melvyn & McFadden, Daniel (ed.), 1978. "Production Economics: A Dual Approach to Theory and Applications," Elsevier Monographs, Elsevier, edition 1, number 9780444850133.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. James FETZER, 2009. "Partial Equilibrium Modeling of Trade Zeros," EcoMod2009 21500031, EcoMod.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Femenia, Fabienne & Gohin, Alexandre, 2007. "Estimating price elasticities of food trade functions: How relevant is the gravity approach?," Working Papers 7211, TRADEAG - Agricultural Trade Agreements.
    2. Alexandre Gohin & Fabienne Féménia, 2009. "Estimating Price Elasticities of Food Trade Functions: How Relevant is the CES‐based Gravity Approach?," Journal of Agricultural Economics, Wiley Blackwell, vol. 60(2), pages 253-272, June.
    3. Arndt, Channing, 1999. "Demand For Herbicide In Corn: An Entropy Approach Using Micro-Level Data," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(1), pages 1-18, July.
    4. Barnett, William A. & Serletis, Apostolos, 2008. "Consumer preferences and demand systems," Journal of Econometrics, Elsevier, vol. 147(2), pages 210-224, December.
    5. Millimet, Daniel L. & Tchernis, Rusty, 2008. "Estimating high-dimensional demand systems in the presence of many binding non-negativity constraints," Journal of Econometrics, Elsevier, vol. 147(2), pages 384-395, December.
    6. Raihan, Selim & Razzaque, Mohammad A, 2007. "WTO and regional trade negotiation outcomes: quantitative assessments of potential implications on Bangladesh," MPRA Paper 38475, University Library of Munich, Germany.
    7. Golan, Amos & LaFrance, Jeffrey T & Perloff, Jeffrey M. & Seabold, Skipper, 2017. "Estimating a Demand System with Choke Prices," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt4qt9q8vr, Department of Agricultural & Resource Economics, UC Berkeley.
    8. Mark M. Pitt & Daniel L. Millimet, 1999. "Estimation of Coherent Demand Systems with Many Binding Non-Negativity Constraints," Working Papers 99-4, Brown University, Department of Economics.
    9. Bousquet, Alain & Ladoux, Norbert, 2006. "Flexible versus designated technologies and interfuel substitution," Energy Economics, Elsevier, vol. 28(4), pages 426-443, July.
    10. Dong, Diansheng & Gould, Brian W. & Kaiser, Harry M., 2002. "The Structure Of Food Demand In Mexico: An Application Of The Amemiya-Tobin Approach To The Estimation Of A Censored System," 2002 Annual meeting, July 28-31, Long Beach, CA 19830, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    11. Arthur Lewbel & Lars Nesheim, 2019. "Sparse demand systems: corners and complements," Boston College Working Papers in Economics 1005, Boston College Department of Economics.
    12. Chihwa Kao & Lung-fei Lee & Mark M. Pitt, 2001. "Simulated Maximum Likelihood Estimation of the Linear Expenditure System with Binding Non-Negativity Constraints," Annals of Economics and Finance, Society for AEF, vol. 2(1), pages 215-235, May.
    13. Dong, Diansheng & Kaiser, Harry M., 2003. "Estimation of a Censored AIDS Model: A Simulated Amemiya-Tobin Approach," Research Bulletins 122113, Cornell University, Department of Applied Economics and Management.
    14. Marc-Andreas Muendler & Sascha O. Becker, 2010. "Margins of Multinational Labor Substitution," American Economic Review, American Economic Association, vol. 100(5), pages 1999-2030, December.
    15. Jean-Pierre H. Dubé, 2018. "Microeconometric Models of Consumer Demand," NBER Working Papers 25215, National Bureau of Economic Research, Inc.
    16. Dawei Zhang & Zhuo (June) Cheng & Hasan A. Qurban H. Mohammad & Barrie R. Nault, 2015. "Research Commentary—Information Technology Substitution Revisited," Information Systems Research, INFORMS, vol. 26(3), pages 480-495, September.
    17. Hendrik Wolff & Thomas Heckelei & Ron Mittelhammer, 2010. "Imposing Curvature and Monotonicity on Flexible Functional Forms: An Efficient Regional Approach," Computational Economics, Springer;Society for Computational Economics, vol. 36(4), pages 309-339, December.
    18. Raja Chakir & Alain Bousquet & Norbert Ladoux, 2004. "Modeling corner solutions with panel data: Application to the industrial energy demand in France," Empirical Economics, Springer, vol. 29(1), pages 193-208, January.
    19. Davis, Christopher G. & Blayney, Donald P. & Dong, Diansheng & Yen, Steven T. & Johnson, Rachel J., 2011. "Will Changing Demographics Affect U.S. Cheese Demand?," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 43(2), pages 1-15, May.
    20. Zhuo Chen & Steven Yen, 2005. "On bias correction in the multivariate sample-selection model," Applied Economics, Taylor & Francis Journals, vol. 37(21), pages 2459-2468.

    More about this item

    Keywords

    Demand and Price Analysis; Agricultural and Food Policy;

    JEL classification:

    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:pugtwp:331575. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/gtpurus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.