A Comment on Consumer Demand Systems with Binding Non-Negativity Constraints

Abstract

Wales and Woodland (1983) have proposed an econometric model to deal with non-negativity constraints in systems of demand equations. This paper points out the relationship between the Wales—Woodland model and the "simultaneous Tobit" model of Amemiya (1974). This relationship is important because Amemiya has proposed a simple estimation procedure that can be utilized for some cases of the Wales—Woodland model. The issue of internal consistency for models of this type is discussed. I point out that internal consistency for the Wales—Woodland model is equivalent to the second order condition for systems without quantity constraints.