Application of the Almost Ideal Demand System (AIDS) Model in the Demand of the Household Commodity Group in Jordan

Abstract

In this study, we provide estimates of An Almost Ideal Demand System (AIDS), as reflected in the demand analysis for Jordan: the free, the homogeneous, the symmetric, and the restricted AIDS models were estimated. The evaluated total expenditure elasticities indicate that the demand for food and housing is inelastic concerning total expenditure (income), whereas the demand for all the other commodity groups is elastic. The uncompensated own-price elasticities indicate that demand for food and clothing items is inelastic and inelastic for all other commodity groups. One striking result was that the own-price elasticity for food seems to be relatively very large compared to the estimated for other countries. Based on the log-likelihood ratios, homogeneity and symmetry given homogeneity for the whole system were rejected. These findings suggest that the demand for aggregate commodity groups in Jordan is not consistent with the theory of demand