Dynamic almost ideal demand systems: an empirical analysis of alcohol expenditure in Ireland

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Abstract:

This paper presents a dynamic form of the Almost Ideal Demand System (AIDS). Three versions of the static AIDS model are employed to determine the preferred long-run equilibrium model and represents the short-run dynamics by an error correction mechanism. This estimation procedure is then applied to alcohol expenditure in Ireland. The estimated point elasticities are consistent with previous studies and a priori expectations. Beer and spirits are found to be price inelastic in both the short and long run. While wine is price inelastic in the short run and price elastic in the long run.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/0003684032000066796

Affiliations: 1: Department of Economics, University College Cork, Ireland 2: Business School, Dublin City University, Glasnevin, Dublin 9 and University College Cork, Ireland

Publication date: June 1, 2003

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