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Effects of Price Shocks to Consumer Demand. Estimating the QUAIDS Demand System on Czech Household Budget Survey Data

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Author Info

  • Kamil Dybczak
  • Peter Toth
  • David Vonka

Abstract

The purpose of his paper is to describe consumer behavior in the Czech Republic by estimating a demand system in which demand depends on income and prices, but also on other factors such as age, size of the household, and position on the labor market. We combine Household Budget Survey data with information on prices from alternative sources between 2000 and 2008. The main focus of our analysis is to provide estimates of both own-and cross-price and income elasticities, which can be used among other things when analyzing the impact of exogenous price changes on consumer demand. Based on our estimates, the commodity bundles of food, energy, and health and bodycare are necessary goods, as their budget elasticity is positive and below one at the same time. Clothing and shoes, transportation and communication, and education and leisure are luxury goods, with income elasticity above one. The own-price elasticities are negative for all commodity groups, as expected. The cross elasticities seem to be smaller than the own elasticities.We found expenditure on energy and transportation and communication to be the most affected by changes in their own prices. We use our estimates to analyze the impact of regulated price changes on consumer demand and discuss the further potential use of our results.

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File URL: http://www.cnb.cz/en/research/research_publications/cnb_wp/download/cnbwp_2010_08.pdf
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Bibliographic Info

Paper provided by Czech National Bank, Research Department in its series Working Papers with number 2010/08.

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Date of creation: Dec 2010
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Handle: RePEc:cnb:wpaper:2010/08

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Related research

Keywords: Consumer behavior; demand systems; price and income elasticities; regulated prices.;

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References

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  1. Lewbel, Arthur, 1991. "The Rank of Demand Systems: Theory and Nonparametric Estimation," Econometrica, Econometric Society, Econometric Society, vol. 59(3), pages 711-30, May.
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Cited by:
  1. Pavel Hait & Petr Jansky, 2014. "Inflation Differentials among Czech Households," CERGE-EI Working Papers wp508, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  2. Petr Jansky, 2013. "Consumer Demand System Estimation and Value Added Tax Reforms in the Czech Republic," IFS Working Papers, Institute for Fiscal Studies W13/20, Institute for Fiscal Studies.

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