Spatial Linear Approximate to Almost Ideal Demand System

Abstract

The paper introduces two spatial systems of demand equation models that are variants of the Linear Approximate to Almost Ideal Demand Systems (LA/AIDS) with habit formation. Specifically, the first model incorporates spatial lag of the quantity demanded in the LA/AIDS and the second model incorporates spatial lag of budget shares. An empirical application using fish expenditure allocation data from the Philippines showed that the two models performed better compared to the static LA/AIDS.