A Flexible Multistage Demand System Based on Indirect Separability

Date
2001-07-01
Authors
Moschini, Giancarlo
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Economics
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EconomicsCenter for Agricultural and Rural Development
Abstract

The notion of indirect separability is exploited to derive a new multistage demand system. The model allows a consistent parameterization of demand relations at various budgeting stages and it fulfills the requirement of flexibility while satisfying separability globally. Two propositions are derived to characterize flexible and separable functional forms, which lead to the specifi- cation of a flexible and separable translog (FAST) demand system. The model is particularly attractive for modeling large complete demand systems and is illustrated with an application to Canadian food demand.

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This is a working paper of an article from Southern Economic Journal 68 (2001): 22, doi: 10.2307/1061509.

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