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Inferential methods for elasticity estimates

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Author Info
Hirschberg, J.G.
Lye, J.N.
Slottje, D.J.

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Abstract

Elasticities are often estimated from the results of demand analysis. However, drawing inferences from them may involve assumptions that could influence the outcome. In this paper we investigate one of the most common forms of elasticity which is defined as a ratio of estimated relationships and demonstrate how the Fieller method for the construction of confidence intervals can be used to draw inferences. We estimate the elasticities of expenditure from Engel curves using a variety of estimation models. Parametric Engel curves are modelled using OLS, MM robust regression, and Tobit. Semiparametric Engel curves are estimated using a penalized spline regression. We demonstrate the construction of confidence intervals of the expenditure elasticities for a series of expenditure levels as well as the estimated cumulative density function for the elasticity evaluated for a particular household.

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File URL: http://www.sciencedirect.com/science/article/B6VC0-4TK92KC-1/2/87b867e0284937aed057969997eb5938
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Publisher Info
Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 147 (2008)
Issue (Month): 2 (December)
Pages: 299-315
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Handle: RePEc:eee:econom:v:147:y:2008:i:2:p:299-315

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Web page: http://www.elsevier.com/locate/jeconom

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Related research
Keywords: Engel curves Fieller method Tobit Robust regression Semiparametric;

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This page was last updated on 2009-12-9.


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