Exploring the Effects of Aggregation Error in the Estimation of Consumer Demand Elasticities
AbstractErrors introduced by using aggregate data in estimating a consumer demand model have long been a concern. We study the effects of such errors on elasticity estimates derived from AIDS and QUAIDS models. Based on a survey of published articles, a generic parameterization of the income distribution, and the range of Gini coefficients reported for 28 OECD countries, we generate and analyse a large number of “observations” on the differences between elasticities calculated at the aggregate level and those calculated at the micro level. We suggest a procedure for evaluating the likely range of aggregation error when a model is estimated with aggregate data.
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Bibliographic InfoPaper provided by McMaster University in its series Social and Economic Dimensions of an Aging Population Research Papers with number 226.
Length: 38 pages
Date of creation: Dec 2007
Date of revision:
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Aggregation error; Consumer demand elasticities; AIDS/QUAIDS models; Income distribution;
Find related papers by JEL classification:
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-26 (All new papers)
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