Calibration of Incomplete Demand Systems in Quantitative Analysis, The

John C. Beghin, Jean-Christophe Bureau, Sophie Drogué
January 2003  [03-WP 324]

Download Full Text

Suggested citation:

Beghin, J.C., J.C. Bureau, and S. Drogué. 2003. "Calibration of Incomplete Demand Systems in Quantitative Analysis, The." Working paper 03-WP 324. Center for Agricultural and Rural Development, Iowa State University.


Abstract

We introduce an easily implemented and flexible calibration technique for partial demand systems, 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.

Keywords: calibration, exact welfare measure, incomplete demand systems, policy analysis.