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GTAP Resource #2433

"Estimating censored and non homothetic demand systems: the generalized maximum entropy approach"
by Femenia, Fabienne and Alex Gohin


Abstract
The econometric estimation of zero censored demand system faces major difficulties. The virtual price approach pioneered by Lee and Pitt in an econometric framework is theoretically consistent but empirically feasible only for homothetic demand system and even may fail to converge depending on initial conditions. In this paper we propose to expand on this approach by relying on the generalized maximum entropy concept instead of the Maximum Likelihood paradigm. The former is robust to the error distribution while the latter must stick with a normality assumption. Accordingly the econometric specification of censored demand systems with virtual prices is made easier even with non homothetic preferences defined over several goods. Illustrative Monte Carlo sampling results show its relative performance.


Resource Details (Export Citation) GTAP Keywords
Category: 2007 Conference Paper
Status: Published
By/In: Presented at the 10th Annual Conference on Global Economic Analysis, Purdue University, USA
Date: 2007
Version:
Created: Femenia, F. (4/18/2007)
Updated: Femenia, F. (4/18/2007)
Visits: 2,027
No keywords have been specified.


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