An empirical comparison of flexible demand system functional forms

This paper compares the performance of eight frequently used flexible forms that are either (1) locally flexible, (2) 'effectively globally regular', or (3) asymptotically globally flexible. Results show that the functions wi th global properties generally perform better, particularly those models ha ving asymptotic properties. Results, using US consumption data, indicate su bstitutability among the components of consumption at most data points. The re is also some interesting substitution volatility around the time of rece ssions in the USA. Copyright (C) 2001 John Wiley & Sons, Ltd.