Maintaining and Testing Separability in Demand Systems

GianCarlo Moschini · Daniele Moro · Richard D. Green

182 citations0/0 files storedAmerican Journal of Agricultural Economics

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Economics of Agriculture and Food Markets Consumer Market Behavior and Pricing Economic and Environmental Valuation

Abstract

Abstract We derive a general elasticity representation of the necessary and sufficient conditions for direct weak separability of the utility function. Parametric restrictions required to implement the separability conditions are presented for three common demand systems: the Almost Ideal, Translog, and Rotterdam. Our empirical application uses the Rotterdam model to test a few separable structures within a complete U.S. demand system emphasizing food commodities. Results, based on size‐corrected likelihood ratio tests, provide support for commonly used separability assumptions about food and meat demand.

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References

1980An Almost Ideal Demand System 1975Transcendental Logarithmic Utility Functions 1989Flexible Functional Forms and Global Curvature Conditions 1962Production Functions with Constant Elasticities of Substitution 1990Elasticities in AIDS Models 1959Separable Utility and Aggregation 1983Non-Parametric Tests of Consumer Behaviour 1947Introduction to a Theory of the Internal Structure of Functional Relationships

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