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Tricks With Hicks: The EASI Demand System
(2006)
  • Arthur Lewbel, Boston College
  • Krishna Pendakur, Simon Fraser University
Abstract
We propose an Exact Affine Stone Index (EASI) demand system, which delivers the convenient properties of Hicksian demands in an empirically simple framework. Like the Almost Ideal Demand (AID) system, EASI budget shares are linear in parameters given real expenditures. However, unlike AID, EASI demands can have any rank and its Engel curves can be polynomials or splines of any order in real expenditures. EASI error terms equal random utility parameters to account for unobserved preference heterogeneity. EASI demand functions can be estimated using ordinary GMM, and, like AID, an approximate EASI model can be estimated by linear regression.
Keywords
  • Consumer demand,
  • Demand systems,
  • Hicks,
  • Marshallian,
  • Cost functions,
  • Expenditure functions,
  • Utility,
  • Engel curves,
  • WP651
Publication Date
June 1, 2006
Citation Information
Arthur Lewbel and Krishna Pendakur. "Tricks With Hicks: The EASI Demand System" 2009 American Economic Review, forthcoming