Compositional Data Analysis and Zeros in Micro Data
AbstractThe application of compositional data analysis methods in economics has some attraction. In particular, this methodology ensures that the stochastic component of budget share models will satisfy the restriction of shares to the unit simplex. The methodology relies upon the use of log-ratios in the statistical analysis. Such an approach is not possible when the data to be analyzed includes observations where the observed budget share is zero. We therefore extend the methods of compositional data analysis to the situation where the data to be analyzed includes observations where the observed budget share is zero. The modified compositional data methods are discussed both in statistical terms and through potential economic interpretations of the method. Further, the modified methodology is applied to the 1988 Australian Household Expenditure Survey yielding estimates for a system of Engel curves.
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Bibliographic InfoPaper provided by Victoria University, Centre of Policy Studies/IMPACT Centre in its series Centre of Policy Studies/IMPACT Centre Working Papers with number g-120.
Date of creation: Mar 1996
Date of revision:
Engel Curves; Modified Almost Ideal Demand System; Composi- tional Data Analysis; Australian H E S data;
Other versions of this item:
- Jane Fry & Tim Fry & Keith McLaren, 2000. "Compositional data analysis and zeros in micro data," Applied Economics, Taylor & Francis Journals, vol. 32(8), pages 953-959.
- C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
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