Long-Run Patterns of Demand: The Expenditure System of the CDES Indirect Utility Function - Theory and Applications

In this paper, we unify and extend the analytical and empirical application of the ”indirect addilog” expenditure system, introduced by Leser (1941), Somermeyer- Wit (1956) and Houthakker (1960). Using the Box-Cox transform, we present a parametric analysis of the Houthakker specification of the fundamental indirect utility function - called the CDES specification (constant differences of Allen elasticities of substitution) by Hanoch (1975). It is shown that the CDES demand system is less restrictive than implied by standard parameter restrictions in the literature, Hanoch (1975), Deaton & Muellbauer (1980), or else neither adequately indicated, Houthakker (1960), Silberberg & Suen (2001). Our parametric examination implies that Marshallian own-price elasticities are no longer restricted to being all larger than one in absolute value; hence CDES can now naturally exhibit both the inelastic and elastic own price elasticities of observable (Marshallian) demands. Furthermore, we argue that in computable general equilibrium models (CGE), the CDES compares favorably with other expenditure systems, e.g. the linear expenditure system (LES), since CDES and LES need the same outside information for calibration of the parameters, but CDES is not confined to constancy of marginal budget shares (linear Engel curves). Moreover, we show that the non-homothetic CDES preferences are a simple and natural extension of the homothetic CES (constant elasticities of substitution) preferences, and, accordingly, CDES can more realistically be used in specifying CGE models with a demand side of non-unitary income elasticities. A succint theoretical briefing of the CDES history with general and concise formulas is offered. We illustrate CDES estimation and the calculation of a comprehensive set of income and price elasticities by applying CDES to Danish budget survey data. With a large number budget items included, coherent numerical values for the income, own, and cross price elasticities, as shown here, seem nowhere calculated and available in the voluminous literature.CDES demand systems, non-homothetic preferences, general price elasticities, CGE modeling, budget data implementation

Open G2 Strings

We consider an open string version of the topological twist previously proposed for sigma-models with G2 target spaces. We determine the cohomology of open strings states and relate these to geometric deformations of calibrated submanifolds and to flat or anti-self-dual connections on such submanifolds. On associative three-cycles we show that the worldvolume theory is a gauge-fixed Chern-Simons theory coupled to normal deformations of the cycle. For coassociative four-cycles we find a functional that extremizes on anti-self-dual gauge fields. A brane wrapping the whole G2 induces a seven-dimensional associative Chern-Simons theory on the manifold. This theory has already been proposed by Donaldson and Thomas as the higher-dimensional generalization of real Chern-Simons theory. When the G2 manifold has the structure of a Calabi-Yau times a circle, these theories reduce to a combination of the open A-model on special Lagrangians and the open B+\bar{B}-model on holomorphic submanifolds. We also comment on possible applications of our results.Comment: 55 pages, no figure

Multiplicative decomposition and index number theory: an empirical application of the Sato-Vartia decomposition

Abstract In De Boer (2006) the additive decomposition of the aggregate change in a variable into its factors was considered. I proposed to use the "ideal" Montgomery decomposition, developed in index number theory, rather than the commonly used methods in structural decomposition analysis and applied it to the example analyzed by Dietzenbacher and Los (1998) (D&L). In this paper I consider the multiplicative decomposition and argue that from a theoretical point of view the "ideal" Sato-Vartia decomposition is to be preferred to the geometric average of the polar decompositions and that from a computational point of view it is to be preferred to the geometric average of all elementary decompositions. Application to the example of D&L reveals that the three methods yield results that are very close to each other

Lack of peaceful resolution with Israel: economic cost for Palestinians

We propose to estimate the economic cost for Palestine and for Palestinian residents due to the lack of peaceful resolution with Israel. Thereto we make use of the consensus estimates of the International Monetary Fund (IMF) and the World Bank (WB) of real growth rates of economic variables and of the nominal national accounts for Palestine over the period 1994-2006. We identify four periods: 1994-1999 with high real growth rates of gross domestic product (GDP) and of gross national income (GNI); 2000-2002 with a strong decline; 2003-2005 with a modest growth; and 2006 with a renewed decline. We derive the real national accounts (prices1999) for the end years: 1999, 2002 and 2005. It follows that over 2000-2002 the real GDP declined by 27.5%; GNI by almost one third; but that real gross disposable income (GDI) “only” declined by 11.3%; and that over 2000-2005 the declines were 13.8% (GDP) ; about 20%(GNI); and 2.9% (GDI), respectively. Consequently, in 2005, the year preceding the renewed isolation of Palestine, real GDP, GNI and GDI were still below their 1999 level. Based on the modest growth scenario of IMF and WB (3% real growth and 3% price increase) we estimate that over the period 2000-2002 the cost for Palestine, measured in terms of nominal GNI, was equal to the GNI of 1999 (5.5 billion US$), and over 2000-2005 to two-and-a-half times the 1999 GNI. Based on the same growth scenario, we estimate the loss for a Palestinian resident, measured in terms of nominal GDI per capita, to be 30% of the 1999 level by the end of 2002 and 25% by the end of 2005

Modeling household behavior in a CGE model: linear expenditure system or indirect addilog?

We try to argue that in a computable general equilibrium model, household preferences should be modeled by the indirect addilog system (IAS) rather than by the frequently used linear expenditure system (LES). Both systems have the same data requirement and are as easy to implement, but IAS provides for a richer description of preferences. Contrarily to LES, its Engel curves are non-linear and it allows for inferior commodities, elastic demand and gross substitution. LES assigns zero utility to households with expenditure below a positive minimum value, whereas IAS assigns a positive utility, provided zero expenditure is replaced by a small positive number. In micro simulation models where the results of a macro CGE model (with one representative household) are used at micro level, this constitutes a clear advantage of IAS. In the framework of an expenditure survey, we find overwhelming statistical evidence that the IAS indirect utility function is likely to be (much) closer to the true indirect utility function than LES. Consequently, expenditure elasticities and welfare changes are likely to be (much) better estimated by IAS. Simulations with a CGE model for Palestine show that price responses and equivalent variation are considerably higher for IAS than for LES

Energy decomposition analysis: the generalized Fisher index revisited

It is generally believed that index decomposition analysis (IDA) and input-output structural decomposition analysis (SDA) (Rose and Casler, 1996; Dietzenbacher and Los, 1998) are different approaches in energy studies; see for instance Ang, Liu and Chung (2004). In this paper it is shown that the generalized Fisher approach, introduced in IDA by Ang, c.s. (2004) for the decomposition of an aggregate change in a variable in factors is equivalent to SDA. They base their formulae on the very complicated generic formula that Shapley (1953) derived for his value of n-person games, and mention that Siegel (1945) gave their formulae using a different route. In this paper tables are given from which the formulae of the generalized Fisher approach can easily be derived for the cases of factors. It is shown that these tables can easily be extended to cover the cases of r=5 and r=6 factors

Structural decomposition analysis and index number theory: an empirical application of the Montgomery decomposition.

Abstract In recent years a large number of empirical articles on structural decomposition analysis, which aims at disentangling an aggregate change into its factors, has been published in Economic Systems Research. Dietzenbacher and Los (D&L) proved that in case of n factors the number of possible decompositions is equal to n!, non of which satisfies time reversal. Averages of decompositions satisfy this requirement, such as the average of all decompositions. In index number theory this problem is known as the decomposition of an aggregate change into symmetric factors (usually two: price and quantity). Balk proposes to generalize the Montgomery decomposition, which obeys time reversal, to three factors. In this paper we apply this solution to a more intricate decomposition into four factors, viz. the example analyzed by D&L. We show that for most sectors the results of the Montgomery decomposition are remarkably close to those of the average of the 24 decompositions

Further search for a neutral boson with a mass around 9 MeV/c2

Two dedicated experiments on internal pair conversion (IPC) of isoscalar M1 transitions were carried out in order to test a 9 MeV/c2 X-boson scenario. In the 7Li(p,e+e-)8Be reaction at 1.1 MeV proton energy to the predominantly T=0 level at 18.15 MeV, a significant deviation from IPC was observed at large pair correlation angles. In the 11B(d,n e+e-)12C reaction at 1.6 MeV, leading to the 12.71 MeV 1+ level with pure T=0 character, an anomaly was observed at 9 MeV/c2. The compatibility of the results with the scenario is discussed.Comment: 12 pages, 5 figures, 2 table

The role of disposable inhalers in pulmonary drug delivery

Introduction: There is increasing interest in the pulmonary route for both local and systemically acting drugs, vaccines and diagnostics and new applications may require new inhaler technology to obtain the most therapeutically and/or cost-effective administration. Some of these new applications can benefit from the use of disposable inhalers. Areas covered: Current trends in pulmonary drug delivery are presented in this review as well as the possible contribution of disposable inhalers to the improvement of pulmonary administration therein. Arguments in favour of disposable inhalers and the starting points for development of devices and their formulations are discussed. Also, a brief review of the state of the art regarding current disposable inhaler development is given. Expert opinion: Prerequisites for the use of disposable inhalers, particularly dry powder inhalers, in applications such as childhood vaccination and for preventing or stopping pandemic outbreaks of highly infectious diseases (like influenza, bird flu, SARS) are that they are simple, cheap and effective. Not only do the devices have to be simple in design, but the drug formulations should also be cheap. This may require a different approach as the formulation may not need to be adapted to improve the inhaler must be designed to enhance formulation dispersion