Abstract
This paper focuses on two issues in empirical demand analysis: Alternative specifications of demand systems in terms of functional form, dynamic structure, and stochastic structure; and alternative estimation procedures. Four functional forms and two dynamic structures are considered. Each demand specification is estimated using both a first-difference procedure in which the first observation is included, and a maximum likelihood procedure in which the first observation is excluded. The results show that the treatment of the first observation can have substantial effects on predicted behavior.
Pollak’s research was supported in part by the National Science Foundation. Wales’ research was supported in part by the Canada Council and UBC. We are grateful to L.J. Lau and E.O. Olsen for useful discussions, to D. Ryan for research assistance, and to J. Goff for editorial assistance.
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© 1992 Kluwer Academic Publishers
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Pollak, R.A., Wales, T.J. (1992). Specification and Estimation of Dynamic Demand Systems. In: Phlips, L., Taylor, L.D. (eds) Aggregation, Consumption and Trade. Advanced Studies in Theoretical and Applied Econometrics, vol 27. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-1795-1_6
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DOI: https://doi.org/10.1007/978-94-011-1795-1_6
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