Introducing Asymmetric Separability in the FAST Multistage Demand System

This paper determines the set of parametric restrictions required to maintain flexibility under asymmetric weak separability for the flexible and separable translog (FAST) multistage demand system. Because there is not a unique set of parametric restrictions that ensures separability and the values of the unconditional price and expenditure elasticities depend on the parametric restrictions imposed, the appropriateness of a chosen set of parametric restrictions should be tested empirically. An empirical example that illustrates how the choice of parametric restrictions affects the estimation results and the functional form of the price and expenditure elasticities is provided.