Calibration of Incomplete Demand Systems in Quantitative Analysis
Economics, Center for Agricultural and Rural Development
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An easily implemented and flexible calibration technique for partial demand systems is introduced, combining recent developments in incomplete demand systems and a set of restrictions conditioned on the available elasticity estimates. The technique accommodates various degrees of knowledge on cross-price elasticities, satisfies curvature restrictions, and allows the recovery of an exact welfare measure for policy analysis. The technique is illustrated with a partial demand system for food consumption in Korea for different states of knowledge on cross-price effects. The consumer welfare impact of food and agricultural trade liberalization is measured.
Beghin, John; Bureau, Jean-Christophe; and Drogue, Sophie, "Calibration of Incomplete Demand Systems in Quantitative Analysis" (2004). Economics Publications. 288.