Generalized habit formation in an Inverse Almost Ideal Demand System: An application to meat expenditures in the U.S.
 Matthew T. Holt,
 Barry K. Goodwin
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The Inverse Almost Ideal Demand System (IAIDS) model of Moschini and Vissa (1992) and Eales and Unnevehr (1994) is extended to include: (1) general, nonlinear, nonadditive habit effects; and (2) a specification for habit stock terms that allows purchases from the distant past to influence current consumption (long memory). The resulting models are compared with a linear habit effects model and a static specification. The empirical estimation is on U.S. quarterly meat expenditures (1961–1993), with each model being subjected to a battery of misspecification tests. Results of these tests, along with tests of homogeneity and symmetry restrictions, indicate clearly that the most generalized dynamic specificationthe one with nonlinear, nonadditive longmemory habit stock effectsis preferred. Furthermore, persistence effects are found to be qualitatively important in that flexibility, consumption scale, and habit flexibility estimates differ, in some instances substantially, between alternative specifications.
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 Title
 Generalized habit formation in an Inverse Almost Ideal Demand System: An application to meat expenditures in the U.S.
 Journal

Empirical Economics
Volume 22, Issue 2 , pp 293320
 Cover Date
 19970601
 DOI
 10.1007/BF01205360
 Print ISSN
 03777332
 Online ISSN
 14358921
 Publisher
 PhysicaVerlag
 Additional Links
 Topics
 Keywords

 IAIDS
 Habit Formation
 Distance Function
 Long Memory
 Meat Demand
 Misspecification Tests
 C51
 C52
 D12
 Q11
 Industry Sectors
 Authors

 Matthew T. Holt ^{(1)}
 Barry K. Goodwin ^{(1)}
 Author Affiliations

 1. Department of Agricultural and Resource Economics at North Carolina State University, Box 8109, 276958109, Raleigh, NC, USA