The Almost Ideal Demand System: An Application to Micro-Level Data

Abstract

This study estimates the Almost Ideal Demand System, using household level consumption data, from one village in India. The elasticity estimates obtained in this study are plausible and generally consistent with previous studies. The study also tests for demand homogeneity and the symmetry of compensated cross price effects. The symmetry is almost consistently rejected. The results pertaining to the tests on homogeneity seem to suggest that demand homogeneity may hold if the sample is relatively homogenous in terms of wealth distribution.