DEMAND FOR MEAT AND FISH PRODUCTS IN KOREA

However, using Stone’s price index causes a simultaneity problem since the dependent
variable w_i appears on the right-hand side of the LA/AIDS. To avoid the simultaneity problem,

n

the lagged share has been used for P*, as log P* = ∑ w_i,t-1 log p_i,t (Eales and Unnevehr).
i

Equation (6) implies that the budget shares of various commodities are linearly related to the
logarithm of the real total expenditure and relative prices.

The general demand restrictions of adding-up, homogeneity, and symmetry are satisfied
by the following parametric restrictions on the AIDS.

Symmetry:            γ_ij = γ_ji .

A test procedure developed by Alston and Chalfant (1993) is used to choose between the
AIDS and the Rotterdam model. The right-hand side of a first-differentiated version of the
LA/AIDS is virtually identical to that of the Rotterdam model, even though the dependent
variables differ. In several studies, the LA/AIDS has been estimated in the first-differentiated
form (e.g., Deaton and Muellbauer, Eales and Unnevehr, Moschini and Meilke, Alston and
Chalfant). In the first-differentiated form, the LA/AIDS becomes

n

(8)            ∆ wi = ∑ Yij∆ logPj + βi∆ log(E / P*).

j=1

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