Nesting Quadratic Logarithmic Demand Systems

We propose a new generalised rank-3 demand system which nests all known (and new) rank-3 and rank-2 demand systems derived from the Quadratic Logarithmic (QL) cost function. We investigate its statistical adequacy against commonly en-countered alternatives using U.K. household data.quadratic Logarithmic demand systems, rank-3 demand systems, individual household data.

Votes or Money? Theory and Evidence from the US Congress.

We consider the effects of demographic and expenditure variables on consumer demand in a system of Engel curves using a smooth coefficient semiparametric model where the expenditure effects on the budget shares vary nonparametrically with demographic variables such as the age of head and number of children in the household. Our findings, based on UK micro data, suggest that with a smooth coefficient semiparametric model there is no need for nonlinear logarithmic expenditure effects in the budget shares. Furthermore, we find evidence of a trade-off between demographic and expenditure effects in Engel curves and that a rank-2 system of Engel curves where the logarithmic expenditure effects are allowed to vary with demographic characteristics either nonparametrically or as a third degree polynomial function cannot be rejected against a rank-3 (quadratic logarithmic) model. The implications on household behaviour and welfare are also examined.Preference Heterogeneity, Rank Test, Demand Systems

Dynamic analysis of British demand for tourism abroad

This paper investigates how preference endogeneity, in the form of habit persistence, can affect short-run and long-run tourism expenditure decisions. The proposed model is applied to British quarterly data over the period 1979-91 and the empirical results suggest that preference endogeneity appears to have an important effect. This has policy implications for countries competing for British tourist arrivals. The differences between the short-run and long-run price and budget elasticities which are implied by habit persistence are also investigated.Preference endogeneity · demand for tourism · habit persistence

On estimating the cost of characteristics indices from consumer demand analysis

We examine the information content of relative equivalence scales using a multiperiod framework and argue that in the absence of Independence of Base (IB) these scales can be uniquely identified from demand analysis only when the transformations of preferences through time are the same for all household types, a property termed as Intertemporally Invariant Base (IIB) utility. Restrictions imposed by IIB on conditional demands are tested empirically and found rejected within the context of a rank-3 demand system applied to individual household data drawn from the U.K. Family Expenditure Survey 1970-86. Welfare implications of false IIB assumptions are also empirically investigated.

Age effects on consumer demand: an additive partially linear regression model

An additive partially linear regression model is used to estimate non-parametrically the effects of total expenditure and age in the context of Engel curves and to investigate the specification and welfare interpretation of the age effects in parametric models of consumer behaviour. Empirical analysis based on data drawn from the U.K. Family Expenditure Survey shows that modelling of the effects of age requires a more sophisticated approach than that generally adopted in parametric demand analysis. It also shows that failing to adequately capture these effects can have misleading welfare implications.