Use of Pooled Data- An Empirical Note on Demand Analysis

This paper reports some empirical results on the validity of using a pooled timeseries of cross-sectional household budget data in estimation of complete demand systems for Indian consumers. The analysis is based on two complete demand systems of the PIGLOG class, viz., the Almost Ideal demand System (AIDS) of Deaton and Muelbauer (1980), and a new system proposed in Coondoo and Majumdar (1986). It turns out that the validation test for pooling data gets rejected and that the discrepancies between estimates based on pooled and nonpooled data are sensitive to the choice of the functional form of consumer's demand behavior.