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When Do Estimated Demand Systems Automatically Satisfy Adding Up?

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Author

Summary, in English

Conditions are presented for when estimated demand systems automatically satisfy adding up. It is shown that there exist nonlinear demand systems (such as the Almost Ideal Demand System) where adding up is allowed in the model, but where it is not automatically satisfied for the LS and SUR estimates. In these situations it is possible to test the applicability of the model as regards adding up. The results are applied to a small model for the consumption of food in Sweden, and it is shown that a test of adding up can be useful in a misspecification analysis.

Publishing year

1996

Language

English

Publication/Series

Working Papers, Department of Economics, Lund University

Document type

Conference paper

Publisher

Department of Economics, Lund University

Topic

  • Economics

Keywords

  • TESTS OF RESTRICTIONS
  • DEMAND ANALYSIS
  • ALLOCATION MODELS
  • ADDING UP

Conference name

7th Econometric Society World Congress

Conference date

0001-01-02

Status

Published