Approximating compensated income from ordinary demand functions

This paper proposes a REversible Second-ORder Taylor (RESORT) approximation to compensated income from ordinary demand functions. RESORT yields the Malmquist-Vartia (M-V) algorithm as a first-order case. Using the Slutsky equation, RESORT obtains the substitution matrix and checks it for symmetry and negative semi-definiteness to validate compensated income. This validation procedure is an improvement over M-V.