Estimation in large and disaggregated demand systems: An estimator for conditionally linear systems

Empirical demand systems that do not impose unreasonable restrictions on pr eferences are typically nonlinear. We show, however, that all popular syste ms possess the property of conditional linearity. A computationally attract ive iterated linear least squares estimator (ILLE) is proposed for large no n-linear simultaneous equation systems which are conditionally linear in un known parameters. The estimator is shown to be consistent and its asymptoti c efficiency properties are derived. An application is given for a 22-commo dity quadratic demand system using household-level data from a time series of repeated cross-sections. Copyright (C) 1999 John Wiley & Sons, Ltd.