Title page for ETD etd-101198-155103

Type of Document Master's Thesis
Author Van Eenoo, Jr., Edward Charles
Author's Email Address eeenoo@vt.edu
URN etd-101198-155103
Title Theoretically Valid Aggregates in the Absence of Homothetic Preferences, Separable Utility, and Complete Price Data
Degree Master of Science
Department Agricultural and Applied Economics
Advisory Committee
Advisor Name Title
Peterson, Everett B. Committee Chair
  • Separability
  • Homotheticity
  • Aggregation
  • Translog
  • Generalized Composite Commodity Theorem
  • Price indices
  • Meat demand
Date of Defense 1998-09-18
Availability unrestricted
The improper aggregation of commodities can have important consequences when estimating a system of group demand equations. Generally, aggregates are created under the assumptions that intra-group preferences are homothetic and the consumer's utility function is weakly separable over some partition. These assumptions place severe restrictions on the model that can significantly impact parameter and elasticity estimates. An alternative to imposing weak separability is to employ the Generalized Composite Commodity Theorem, which requires the relative intra-group commodity prices to be independent of the group price index. This study compares the results of estimating a demand system for composite beef, pork, and poultry products under the assumptions of weak separability and the Generalized Composite Commodity Theorem. Another important issue related to aggregation is the specification of an appropriate group price index. Price indices consistent with linear homogeneous preferences (a subset of the homothetic class of preferences) and non-homothetic intra-group preferences are identified and it is shown that several of the commonly employed indices are biased in the absence of complete price data.
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