Estimating an ECM-AIDS Model for Urban-Area's Household Expenditure: The Case of Iran

This paper represents static and dynamic specifications of the Almost Ideal Demand System (AIDS) based on cointegration techniques and error correction models. Based on Iranian urbanarea’s household expenditure data over the period 1984-2004, itwas found that the proposed formulation for dynamic specification performs well on both theoretical and statistical grounds as the theoretical properties of homogeneity and symmetry are supported by the data. Moreover, with computing short- run and long-runelasticities, it was found that food, clothing and housing are complements, regardless of time horizon.