Testing Homogeneity in the Linearized Almost Ideal Demand System

descriptionPublicationkeyboard_double_arrow_right Article 01 Feb 1998 English Publisher:WileyJournal:American Journal of Agricultural Economics, volume 80, pages 208-220 (issn: 0002-9092, eissn: 1467-8276,

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Authors: Adolf Buse;

doi: 10.2307/3180282

Testing Homogeneity in the Linearized Almost Ideal Demand System

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Abstract

AbstractThe behavior of exact tests for homogeneity (F and Hotelling T2) is compared with size‐adjusted LR tests in the linearized AIDS model with different approximating price indexes (Stone, Paasche, Laspeyres). The Monte Carlo evidence shows that test size distortions are sensitive to the correlation structure of prices, the time‐series properties of the data, and the choice of price index. None of the results explains the persistent over‐rejection of homogeneity in applied work.

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