EASI made Easier

Lewbel and Pendakur (2008) develop the idea of implicit Marshallian demands. Implicit Marshallian demand systems allow the incorporation of both unobserved preference heterogeneity and complex Engel curves into consumer demand analysis, circumventing the standard problems associated with combining rationality with either (or both) unobserved heterogeneity and high rank in demand. They also develop the Exact A¢ ne Stone Index (EASI) implicit Marshallian demand system wherein much of the demand system is linearised and thus relatively easy to implement and estimate. The current paper o¤ers a less technical introduction to implicit Marshallian demands in general and to the EASI demand system in particular. I show how to implement the EASI demand system, paying special attention to tricks which allow the investigator to further simplify the problem without sacri…cing too much in terms of model ‡exibility. STATA code to implement the simpli…ed models is included throughout the text and in an appendix.