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Original Articles

Linear estimation of the nonlinear almost ideal demand system: a Monte Carlo study

Pages 181-186 | Received 25 Sep 1996, Published online: 11 Mar 2008
 

Abstract

Most applied economists use the almost ideal demand system or AIDS to model demand without knowing the consequences of alternative estimation procedures. In this paper, Monte Carlo experiments are undertaken to evaluate the performance of several estimation methods of AIDS. Based on the measures of trace mean squared error and aggregate bias, the iterative procedure proposed by Deaton and Muellbauer (1980) is found to dominate.

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