The Silence Bleating! Of the Lambdas: Comment

Abstract

Alston and Chalfant…s least squares test for functional form is biased. A valid test is derived for both univariate and multivariate regression models. An estimation method to account for endogenous left‐ and right‐hand‐side current‐period budget shares in the Rotterdam and LA‐AIDS models is presented. Alston and Chalfant…s strenuous rejection of the LA‐AIDS model in favor of the Rotterdam model is not supported by their data.

Keywords: Almost Ideal Demand System, demand models, double length regressions, functional form, Lagrange multiplier tests, least squares, maximum likelihood, Rotterdam model, C520, D120, Q110