GTAP Resources: Resource Display
| GTAP Resource #6071 |
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"Estimation of an Implicit Additive Indirect Demand System" Authors: Yang, Anton and Paul Preckel Abstract Quantitative economic models typically rely on CES demand or more recent nonhomothetic CES systems that impose a common substitution structure across goods. We estimate a more general globally regular demand system that relaxes this restriction while preserving tractability. We combine share inversion with constrained optimization and develop inference for parameters on the boundary of the relaxed regularity domain. Using unpublished 2017 ICP expenditure and price data, we reject the common-substitution restriction and find substantial heterogeneity in substitution behavior across goods. The unrestricted system preserves the familiar ranking of agriculture, manufacturing, and services by income elasticity, but changes the low-income curvature of demand and the implied substitution structure. We further extend the estimator to a constrained panel with country-sector fixed effects and recover the same benchmark from within-country variation, which shows the approach is not specific to a single cross section. Quantitatively, we show that the empirical Engel differences matter most when shocks operate through real income and expenditure reallocation, especially in developing economies with large food shares. More broadly, we show that demand restrictions often imposed for tractability are empirical questions whose economic consequences can be measured directly from the data. |
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- Calibration and parameter estimation |
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Public Access  GTAP Resource 6071 (1.3 MB) Replicated: 0 time(s)Restricted Access No documents have been attached. Special Instructions No instructions have been specified. |
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Last Modified: 8/24/2026 8:40:13 AM
