Journal of Economics

, Volume 102, Issue 3, pp 217–235 | Cite as

Global restrictions on the parameters of the CDES indirect utility function

  • Bjarne S. JensenEmail author
  • Paul de Boer
  • Jan van Daal
  • Peter S. Jensen


This paper extends the analytical and empirical application of the basic indirect utility function of Houthakker–Hanoch—called the CDES specification (constant differences of elasticities of substitution). The non-homothetic CDES preferences are the natural parametric extension on the global domain of the homothetic CES preferences with many commodities, and CDES can conveniently be used in specifying CGE multisector models with a demand side satisfying observable Engel curve patterns. Moreover, all Marshallian own-price elasticities are no longer restricted to exceed one, and positive and negative cross-price effects are allowed for in empirical demand analyses. Explicit calculations of the Allen elasticities of substitution are instrumental in demonstrating the economic implications of the parameters of indirect utility functions with global regularity properties and flexibility of the derived demand systems.


Indirect utility functions Demand systems 

JEL Classification

D11 D00 


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Copyright information

© Springer-Verlag 2010

Authors and Affiliations

  • Bjarne S. Jensen
    • 1
    Email author
  • Paul de Boer
    • 2
  • Jan van Daal
    • 3
  • Peter S. Jensen
    • 4
  1. 1.Department of Environmental and Business EconomicsUniversity of Southern DenmarkEsbjergDenmark
  2. 2.Econometric InstituteErasmus University RotterdamRotterdamThe Netherlands
  3. 3.TrianGleUniversite de Lyon-2LyonFrance
  4. 4.Department of Business and EconomicsUniversity of Southern DenmarkOdenseDenmark

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