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Virtual prices and the impact of house rationing in Belgium on consumer choices

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  • Fleissig, Adrian R.
  • Whitney, Gerald

Abstract

Obtaining estimates of demand relationships between goods and services during the periods of rationing, that characterized the first half of the twentieth century, is complicated by the uncertainty about both the period and the goods for which rationing is binding. Consequently, researchers have turned to using the difference between virtual and observed prices as an indicator of binding rationing. However, this often requires using external data from another country or an unrationed sample period to estimate virtual prices. In contrast, our methodology uses data from the rationed period to estimate virtual prices. The ration constrained revealed preference approach provides virtual prices that can be used to estimate a system of free demands. We then estimate the impact that rationing had on expenditure on unrationed goods using relationships between free and rationed demand elasticities. We apply our methodology to inter war period data from Belgium.

Suggested Citation

  • Fleissig, Adrian R. & Whitney, Gerald, 2013. "Virtual prices and the impact of house rationing in Belgium on consumer choices," Explorations in Economic History, Elsevier, vol. 50(2), pages 308-315.
    • Handle: RePEc:eee:exehis:v:50:y:2013:i:2:p:308-315
    DOI: 10.1016/j.eeh.2012.11.001
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    References listed on IDEAS

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    1. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
    2. Seale, James L., Jr. & Regmi, Anita & Bernstein, Jason, 2003. "International Evidence On Food Consumption Patterns," Technical Bulletins 33580, United States Department of Agriculture, Economic Research Service.
    3. Neary, J. P. & Roberts, K. W. S., 1980. "The theory of household behaviour under rationing," European Economic Review, Elsevier, vol. 13(1), pages 25-42, January.
    4. Bettendorf, Leon & Buyst, Erik, 1997. "Rent Control and Virtual Prices: A Case Study for Interwar Belgium," The Journal of Economic History, Cambridge University Press, vol. 57(3), pages 654-673, September.
    5. Sonya Kostova Huffman & Stanley R. Johnson, 2004. "Impacts of Economic Reform in Poland: Incidence and Welfare Changes Within a Consistent Framework," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 626-636, May.
    6. Hausman, Jerry, 1999. "Cellular Telephone, New Products, and the CPI," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(2), pages 188-194, April.
    7. Hal R. Varian, 1983. "Non-parametric Tests of Consumer Behaviour," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(1), pages 99-110.
    8. Seale, James L., Jr. & Regmi, Anita & Bernstein, Jason, 2003. "International Evidence On Food Consumption Patterns," Technical Bulletins 33580, United States Department of Agriculture, Economic Research Service.
    9. E. Rothbarth, 1941. "The Measurement of Changes in Real Income under Conditions of Rationing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 8(2), pages 100-107.
    10. Fleissig, Adrian R. & Whitney, Gerald, 2011. "A revealed preference test of rationing," Economics Letters, Elsevier, vol. 113(3), pages 234-236.
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    Cited by:

    1. Adrian R. Fleissig & Gerald A. Whitney, 2014. "Estimating demand elasticities under rationing," Applied Economics, Taylor & Francis Journals, vol. 46(4), pages 432-440, February.
    2. Fleissig, Adrian R. & Whitney, Gerald A., 2015. "Belgium relief fund, post war food shortages and the “True” cost of living," Explorations in Economic History, Elsevier, vol. 58(C), pages 93-106.
    3. Fleissig, Adrian R. & Whitney, Gerald A., 2015. "A revealed preference test of rationing a Monte Carlo analysis," Economic Modelling, Elsevier, vol. 45(C), pages 207-211.

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    More about this item

    Keywords

    Generalized Axiom of Revealed Preference; Rationing; Substitution elasticities;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • N44 - Economic History - - Government, War, Law, International Relations, and Regulation - - - Europe: 1913-

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