HENRI THEIL'S CONTRIBUTIONS TO ECONOMICS AND ECONOMETRICS Advanced Studies in Theoretical and Applied Econometrics Volume24 Managing Editors: A.J. Hughes Hallet, University of Strathclyde, Glasgow, United Kingdom J. Marquez, The Federal Reserve System, Washington, D.C., US.A. Editorial Board: F.G. Adams, University of Pennsylvania, Philadelphia, US.A. P. Balestra, University of Geneva, Switzerland M.G. Dagenais, University of Montreal, Canada D. Kendrick, University of Texas, Austin, US.A. J.H.P. Paelinck, Netherlands Economic Institute, Rotterdam, The Netherlands R.S. Pindyck, Sloane School of Management, M.I. T., US.A. H. Theil, University of Florida, Gainesville, US.A. W. Welfe, University of Lodz, Poland The titles published in this series are listed at the end of this vo/ume. Henri Theil's Contributions to Economics and Econometrics Volume 11: Consumer Demand Analysis and Information Theory Edited by Baldev Raj Wilfrid Laurier University, Water/oo, Ontario, Canada and Johan Koerts Erasmus University, Rotterdam, The Nether/ands .... "SPRINGER SCIENCE+BUSINESS MED~ B.V. Library of Congress Cataloging-in-Publication Data (Revised for vol. 2) Henri Theil's contribution to economics and econometrics / edited by Baldev Raj, J. Koerts. p. cm. - (Advanced studies in theoretical and applie·' econometrics: V. 23, 24) Includes index. Contents: v. 1. Econometric theory and methodology. - v. 2. Consumer demand analysis and information theory. ISBN 978-94-010-5062-3 ISBN 978-94-011-2408-9 (eBook) DOI 10.1007/978-94-011-2408-9 1. Theil, Henri - Contributions to Econometrics. I. Theil, Henri. 11. Raj, Baldev, 1941- III. Koerts, J. IV. Series. HB139.H46 1991 330'01'5195 91-38183 ISBN 978-94-010-5062-3 Printed on acid-tree paper All Rights Reserved © 1992 Springer Science+Business Media Dordrecht Originally published by K1uwer Academic Publishers in 1992 Softcover reprint cf the hardcover 1st edition 1992 as specified on appropriate pages within. No part of the material protected by this copyright notice may be reproduced or utilized in any form or by any means, eleclronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without written permission from the copyright owner. DEDICATION To Eleonore Theil Balbeer Raj and Maria Koerts Contents CONTENTS OF THE COLLECTION VOLUME I PART ONE: INTRODUCTION AND OVERVIEW Chapter 1 Henri Theil's Biography and his Contributions to Economics and Econometrics: An Overview Baldev Raj Chapter 2 Professor Theil's Contribution to Economics Johan Koerts Chapter 3 Theil's Citation Classics 1. Citation Classic: Economics andInformation Theory Henri Theil 2. Citation Classic: Preprinting Principles of Econometrics Henri Theil 3. Citation Classic: Econometric Research in the Early 1950s, Economic Forecasts and Policy Henri Theil Chapter 4 Theil's Work History and Biographical Data 1. Present Position 2. Previous Positions 3. Education and Honours 4. Visiting and Other Appointments 5. Professional Societies 6. Editorial Activities 7. Dissertations Supervised Appendix A Visitors (Guests): 1957 - 1991 Appendix B List of Names of Co-authors viii B. Raj and J. Koerts Chapter 5 Theil's Annotated Bibliography PART TWO: ECONOMETRIC THEORY AND METHODOLOGY Section 2.1 Structural Equations Chapter 6 Estimation and Simultaneous Correlation in Complete Equation Systems Henri Theil Chapter 7 Estimation of Parameters of Econometric Models Henri Theil Chapter 8 Some Recent Work of H. Theil on Estimation in Systems of Simultaneous Equations Roy Radner and Francis Bobkoski Chapter 9 The Aggregation Implications of Identifiable Structural Macrorelations Henri Theil Chapter 10 Three-Stage Least-Squares: Simultaneous Estimation of Simultaneous Equations Arnold Zellner and Henri Theil Section 2.2 Systems of Equations Chapter 11 A Multinomial Extension of the Linear Logit Model Henri Theil Chapter 12 Recent Methodological Advances in Economic Equation Systems Henri Theil and Kenneth W. Clements Chapter 13 Lp-Norm Estimation of Non-Linear Systems Henri Theil, Mercedes C. Rosa/sky, and Walter S. McManus Contents ix Section 2.3 The Relationship Between Time Series Models and Econometric Models Chapter 14 The Final Form of Econometric Equation Systems Henri Theil and J.e.G. Boot Section 2.4 Measuring Expectations from Business Opinion Surveys Chapter 15 Results of a Survey on Entrepreneurial Behaviour Patterns Henri Theil and W. van Schaik Chapter 16 On the Time Shape of Economic Microvariables and the Munich Business Test Henri Theil Chapter 17 Recent Experiences with the Munich Business Test: An Expository Article Henri Theil Section 2.5 Mixed Statistical Estimation Chapter 18 On Pure and Mixed Statistical Estimation in Economics Henri Theil and A.S. Goldberger Chapter 19 Mixed Estimation Based on Quasi-Prior Judgments Henri Theil Section 2.6 Multiple Regression Analysis Chapter 20 A Rank-Invariant Method of Linear and Polynomial Regression Analysis, Parts I, II and III Henri Theil Chapter 21 On the Efficiency of Wald's Method of Fitting Straight Lines Henri Theil and J. van IJzeren Chapter 22 Multiplicative Randomness in Time Series Regression Analysis Henri Theil and LB.M. Mennes x B. Raj and J. Koerts Chapter 23 A Simple Unimodal Lag Distribution Henri Theil and Robert Stern Section 2.7 Analysis of Residuals and Tests for Regression Equations Chapter 24 Estimates and their Sampling Variance of Parameters of Certain Heteroscedastic Distributions Henri Theil Chapter 25 Specification Errors and the Estimation of Economic Relationships Henri Theil Chapter 26 Testing the Independence of Regression Disturbances Henri Theil and A.L. Nagar Chapter 27 The Analysis of Disturbances in Regression Analysis Henri Theil Chapter 28 A Simplification of the BLUS Procedure for Analyzing Regression Disturbances Henri Theil Section 2.8 Laitinen and Meisner: Simulations Chapter 29 Why is Demand Homogeneity So Often Rejected? K. Laitinen Chapter 30 The Sad Fate of the Asymptotic Slutsky Symmetry Test for Large Systems IP. Meisner Section 2.9 Monte Carlo Tests Chapter 31 Monte Carlo Testing in Systems of Equations Henri Theil, T.G. Taylor and I.S. Shonkwiler Contents xi Section 2.10 Methodology Chapter 32 A Reconsideration of the Keynes-Tinbergen Discussion on Econometric Techniques Henri Theil Chapter 33 Some Developments of Economic Thought in the Netherlands Henri Theil Index VOLUME II PART THREE: DEMAND ANALYSIS Section 3.1 Three Early Papers Chapter 34 Qualities, Prices and Budget Enquiries Henri Theil Chapter 35 Substitution, Complementarity, and the Residual Variation Around Engel Curves Henri Theil and Heinz Neudecker Chapter 36 The Information Approach to Demand Analysis Henri Theil Section 3.2 Index Numbers Chapter 37 Best Linear Index Numbers of Prices and Quantities Henri Theil Chapter 38 On the Geometry and the Numerical Approximation of Cost of Living and Real Income Indices Henri Theil Chapter 39 A New Index Number Formula Henri Theil xii B. Raj and J. Koerts Section 3.3 Modelling the Disturbances in Demand Systems Chapter 40 An Economic Theory of the Second Moments of Disturbances of Behavioral Equations Henri Theil Chapter 41 A Theory of Rational Random Behavior Henri Theil Section 3.4 The Econometrics of Demand Systems Chapter 42 The Effect of Measurement Errors on the Estimation of Demand Systems Henri Theil Chapter 43 The Two Perils of Symmetry-Constrained Estimation of Demand Systems Denzil Fiebig and Henri Theil Chapter 44 A Simple and Efficient Estimation Method for a Non­ Linear Demand System Henri Theil. Baldev Raj, and Eric Diamond Section 3.5 The Independence Transformation Chapter 45 The Independence Transformation: A Review and Some Further Explorations Henri Theil and Kenneth Laitinen Chapter 46 The Independence Transformation under Almost Additivity Henri Theil PART FOUR: INFORMATION THEORY Section 4.1 Demand Analysis Chapter 47 Budget Share Transitions in the Netherlands, 1952-1977 Renate Finke and Henri Theil Contents xiii Section 4.2 Economic Inequality and International Comparisons Chapter 48 International Inequalities and General Criteria for Development Aid Henri Theil Chapter 49 International Comparisons of Prices and Quantities Consumed Teun Kloek and Henri Theil Chapter 50 Regional Per Capital Incomes and Income Inequalities: Point Estimates and Their Standard Errors Henri Theil and Yoram Friedman Chapter 51 Inequality and Social Status in Successive Generations Henri Theil and Robert Stambaugh Chapter 52 World Income Inequality and its Components Henri Theil Chapter 53 The Development of International Inequality 1960-1985 Henri Theil Section 4.3 Applications in Econometrics Chapter 54 A Maximum Entropy Approach to the Specification of Distributed Lags Henri Theil and Denzil Fiebig Chapter 55 Information-Theoretic Measures of Fit for Univariate and Multivariate Linear Regressions Henri Theil and Chiag-Fan Chung Section 4.4 Input-Output Analysis Chapter 56 Linear Aggregation in Input-Output Analysis Henri Theil Chapter 57 The Information Approach to the Aggregation of Input­ Output Tables Henri Theil and Pedro Uribe xiv B. Raj and J. Koerts Chapter 58 A Comparison of Shift-Share and the RAS Adjustment Henri Theil and Riddhi Ghosh Section 4.5 Applications- in Business and Finance Chapter 59 On the Use of Information Theory Concepts in the Analysis of Financial Statements Henri Theil Section 4.6 Applications in Social Sciences Chapter 60 The Desired Political Entropy Henri Theil Chapter 61 A Note on the Measurement of Racial Integration of Schools by Means of Informational