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Complete systems of demand equations: some thoughts about aggregation and functional form

Published online by Cambridge University Press:  17 August 2016

A.P. Barten
A.P. Barten*
Affiliation:
K.U.L. — Katholieke Universiteit te Leuven — C.O.R.E.
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Extract

Constructing complete demand systems is an example of the ideal type of econometrics. It uses a well-developed theory, an extensive set of data and a refined estimation technique. In particular, a strong relationship between theory and estimation distinguishes it from other empirical economic studies. This strong relationship is at the same time a source of possibilities and a source of problems. Here, the focus will be on some problems caused by the fact that the theory is about individual behaviour while the data is about aggregate behaviour and by the fact that the theory is not much help in specifying the functional form of the system, which is obviously needed for estimation. These two problems are interrelated to a certain extent and have not yet been solved satisfactorily.

Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 40 , Issue 1 , 1974 , pp. 3 - 20
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1974 

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References

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