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Dive into the research topics where Keith R. McLaren is active.

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Featured researches published by Keith R. McLaren.


Canadian Journal of Economics | 1992

An Empirically Oriented Demand System with Improved Regularity Properties

Keith R. McLaren

While the almost ideal demand system has received increasing attention in empirical studies of consumer demand, the fact that the underlying PIGLOG cost function is not globally regular has often led to violation of negative semidefiniteness in the estimated Slutsky matrix. This paper suggests a modification to the PIGLOG class of preferences, termed MPIGLOG, which preserves regularity in a wider region of expenditure-price space. In an empirical section, the almost ideal demand system special case of PIGLOG is compared with the analogous special case of MPIGLOG, which the authors term MAIDS. The comparison demonstrates the improved regularity features of MAIDS.


Journal of Econometrics | 1996

The Stochastic Specification of Demand Share Equations Restricting Budget Shares to the Unit Simplex

Jane M. Fry; Tim R.L. Fry; Keith R. McLaren

Abstract The traditional approach to estimating systems of share equations is to append a multivariate normal stochastic component to the deterministic component. The adding up restrictions are then exploited to delete one equation and estimation is carried out by maximum likelihood. Such an approach leads to an implied model which violates economic theory, as there remains a nonzero probability of shares being negative or greater than unity. In this paper we propose the use of a method from the statistics literature, compositional data analysis, and a distribution familiar to statisticians, the additive logistic normal, for the estimation of a system of demand share equations.


International Economic Review | 1980

Atemporal, Temporal and Intertemporal Duality in Consumer Theory

Keith R. McLaren

Duality is now a well established tool in economic theory. Blackorby, Primont and Russell [1978] and Diewert [1974] survey duality between direct and indirect aggregator functions, cost functions, transformation functions and profit functions. One advantage of the application of duality theory in economic optimization problems is that, by judicious choice of the parent function, the required response functions of an economic agent can be derived without recourse to explicit optimization. This advantage has generally been demonstrated in the context of static optimization problems. However, it seems clear that duality theory would be even more useful in dynamic optimization problems where there should be a greater payoff in avoiding complex explicit optimization. In the context of a dynamic optimization problem, duality relationships between instantaneous functions (such as the parent functions previously referred to) might be termed atemporal duality. Of perhaps more interest, however, would be temporal duality, or the relationship between the present values of sequences of the corresponding instantaneous parent functions. In principle, temporal duality results already exist, since the dualities surveyed in Blackorby, Primont and Russell, for example, are not limited to the context of static optimization. However, in the context of dynamic optimization there remains the problem of linking properties of instantaneous functions with the corresponding temporal, or present value, functions. This link, or intertemporal duality, is the subject of the present paper. Intertemporal duality is examined here in the context of consumer theory. The major theoretical results concern the duality between the instantaneous indirect utility function and the total indirect utility function (hereafter, the optimal value function), on the one hand, and the duality between the instantaneous cost function and the total cost function (hereafter, the wealth function), on the other hand. We provide dynamic analogues of Roys Theorem and Hotellings Theorem, which provide a derivation (almost everywhere) of Marshallian and Hicksian demand functions, by simple differentiation of the optimal value function and the wealth function, respectively.


American Journal of Agricultural Economics | 2005

Specification and Estimation of Regular Inverse Demand Systems: A Distance Function Approach

K. K. Gary Wong; Keith R. McLaren

To allow realistic policy simulations in a changing environment, inverse demand systems must remain regular over substantial variations in quantities. The distance function is a convenient vehicle for generating such systems. While its use directly yields Hicksian inverse demand functions, those functions will not usually have an explicit representation in terms of the observable variables. However, this problem need not hinder estimation and can be solved by using a numerical inversion estimation approach. This article develops the formal theory for using distance functions in this context and demonstrates the operational feasibility of the method.


Empirical Economics | 1995

A Simple Nested Test of the Almost Ideal Demand System

Keith R. McLaren; Jane M. Fry; Tim R.L. Fry

The MPIGLOG specification of an indirect utility function gives rise to Cooper and McLarens (1992) Modified Almost Ideal Demand System (MAIDS) specification, which nests the Almost Ideal Demand System. Following the ‘combined’ approach outlined by Fry, Fry and McLaren (1993), we transform the deterministic equations to logratio form for estimation. This procedure not only restricts the shares implied by the model to the unit simplex, but also provides a transparent representation of the restriction implied by the Almost Ideal Demand System. We estimate MAIDS (with and without the Almost Ideal Demand System restriction imposed) using the ‘combined’ approach and proceed to test the Almost Ideal Demand System restriction.


American Journal of Agricultural Economics | 2009

The Benefit Function Approach to Modeling Price-Dependent Demand Systems: An Application of Duality Theory

Keith R. McLaren; K. K. Gary Wong

In this article, we advocate more extensive use of the benefit function in specifying price-dependent or inverse demand models. We demonstrate how duality theory may be used to establish the interrelationships between the Marshallian (or Hicksian) inverse demands and Luenberger’s adjusted price functions, allowing estimable inverse demands to be derived directly from a benefit function. We estimate two systems of inverse demands for Japanese quarterly fish consumption. Results indicate that the procedures and methods employed here appear promising, and may prove beneficial for quantity and welfare analysis when modeling systems of inverse demand functions. Copyright 2009, Oxford University Press.


Applied Economics | 2001

Modelling zeroes in microdata

Jane M. Fry; Timothy R L Fry; Keith R. McLaren; Tanya Natalie Smith

Although the literature contains a number of suggestions for dealing with problems caused by a preponderance of zero expenditure observations that frequently occur in micro level budget studies, in general, these suggestions seem to be either empirically intractable or theoretically unappealing. In this paper it is argued that a natural theoretical specification can be motivated by duality theory and that the statistical technique of compositional data analysis provides a corresponding complementary stochastic specification. The resulting model is a consistent theoretical and stochastic specification for handling the possibility of a zero demand over a range of expenditures and/or prices. The model is then applied to the 1988/89 Australian Household Expenditure Survey.


Economics Letters | 2001

On the empirical exploitation of consumers’ profit functions in static analyses

Keith R. McLaren; Gary K.K. Wong

Abstract This paper proposes the empirical exploitation of the consumer’s profit function in representing preferences, and specifying estimable yet general demand systems. An empirical application demonstrates the value of this generalisation and the feasibility of the proposed method.


Econometric Reviews | 1990

Okishio, Nobuo, A Theory of Reproduction (In Japanese)

Keith R. McLaren

Allecation models, such as consumer demand systems, typically imply a degenerate error structure. The usual approach in estimation is to delete one equation, and to appeal to the results of Barten (1969), for example, that parameter estimates are invariant to the equation deleted. However such proofs of invariance are not straightforward. This paper demonstrates that such systems are observationally equivalent to structures common in the simultaneous equations literature, for which invariance is obvious, and hence provides a more transparent demonstration of conditions for invariance.


Economics Letters | 1996

Parsimonious autocorrelation corrections for singular demand systems

Keith R. McLaren

The adding up condition of budget share equations is known to imply restrictions for the autoregresive structure of errors. The implications of these restrictions when estimation is in terms of additive normal errors of additive logistic normal errors is clarified, and a byproduct is a specification of the autocorrelation matrix with a structure consistent with the model, but with number of parameters equal to the number of goods. This is more appealing than the scalar diagonal matrix form, but more parsimonious than having number of parameters proportional to the square of the number of goods.

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H. Youn Kim

Western Kentucky University

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Michael K. Wohlgenant

North Carolina State University

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