Identification of Consumer Demand and Production Systems with Limited Dependent Variables

Abstract

Some similarities between the simultaneous equation Tobit model and the consumer demand and production systems with limited dependent variables are addressed. Such systems have their distinctive features for parameter identification. We consider the identification of some consumer demand and production structures without price variations across samples. The linear expenditure system and translog indirect utility function for consumers demand and the translog profit function for production economics with binding nonnegative constraints are analyzed. The presence of binding nonnegative constraints has effects on the identification of all the parameters in the nonhomothetic translog indirect utility function and the translog profit function but not the linear expenditure system.