Working Papers 2002 – Abstracts
Modelling Regular and Estimable Inverse Demand Systems: A Distance Function
Approach
Gary K.K. Wong and Keith R. McLaren
To be useful for realistic policy simulation in an environment of rapid
structural change, inverse demand systems must remain regular over substantial
variations in quantities. The distance function is a convenient vehicle
for generating such systems. While it directly yields Hicksian inverse
demand functions, those functions will not usually have an explicit representation
in terms of the observable variables. Note however that this problem need
not hinder estimation and could be solved by using the numerical inversion
estimation approach. This paper develops the formal theory for using distance
functions in this context, and demonstrates the operational feasibility
of the method.
Keywords: Inverse Demands; Distance Functions; Numerical
Inversion Estimation Method; Separability.
Next Abstract
