A Rational Rank Four Demand System

  title={A Rational Rank Four Demand System},
  author={Arthur Lewbel},
Past parametric tests of demand system rank employed polynomial Engel curve systems. However, by Gorman’s (1981) theorem, the maximum possible rank of a utility derived polynomial demand system is three. The present paper proposes a class of demand systems that are utility derived, are close to polynomial, and have rank four. These systems nest rational polynomial demands, and so can be used to test ranks up to four. These systems are suitable for applications where high rank is likely, such as… CONTINUE READING

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