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Estimating Costs of Children from Micro-Unit Records: A New Procedure Applied to Australian Data

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  • Griffiths, W.E.
  • Valenzuela, R.

Abstract

Measuring the costs of children is of immense practical importance in a range of economic and social policy areas. In this paper, we introduce a new econometric procedure that improves on existing methods for obtaining estimates of such costs from a demand system. We develop, using an extended linear expenditure system, an iterative maximum likelihood estimator that overcomes possible estimation problems that arise from the 2-step estimation procedures employed by earlier authors. We also allow for a more general assumption about the equation “errors”, that of non-zero correlation between the errors for different commodities in the same household. Another important contribution is the development of an estimation procedure for sets of seemingly unrelated regressions where the different sets of equations are linked by some common parameters. The proposed procedure is applied to the 1988-89 and 1993-94 Australian Household Expenditure Surveys and results obtained update estimates of both the commodity-specific and general scales previously obtained for Australia.

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Bibliographic Info

Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 795.

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Length: 32 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:mlb:wpaper:795

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Web page: http://www.economics.unimelb.edu.au
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Related research

Keywords: CHILDREN ; COSTS ; DEMAND ; ECONOMETRICS;

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References

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  1. Lluch, Constantino, 1973. "The extended linear expenditure system," European Economic Review, Elsevier, vol. 4(1), pages 21-32, April.
  2. Chatterjee, Srikanta & Michelini, Claudio & Ray, Ranjan, 1994. "Expenditure Patterns and Aggregate Consumer Behaviour: Some Experiments with Australian and New Zealand Data," The Economic Record, The Economic Society of Australia, vol. 70(210), pages 278-91, September.
  3. Deaton, Angus S & Muellbauer, John, 1986. "On Measuring Child Costs: With Applications to Poor Countries," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 720-44, August.
  4. Christopher J. Nicol, 1994. "Identifiability of Household Equivalence Scales through Exact Aggregation: Some Empirical Results," Canadian Journal of Economics, Canadian Economics Association, vol. 27(2), pages 307-28, May.
  5. Lewbel, Arthur, 1989. "Household equivalence scales and welfare comparisons," Journal of Public Economics, Elsevier, vol. 39(3), pages 377-391, August.
  6. Ma. Rebecca J. Valenzuela, 1996. "Engel Scales for Australia, the Philippines and Thailand: A Comparative Analysis," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 29(2), pages 189-198.
  7. Browning, Martin, 1992. "Children and Household Economic Behavior," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1434-75, September.
  8. Nelson, Julie A, 1993. "Household Equivalence Scales: Theory versus Policy?," Journal of Labor Economics, University of Chicago Press, vol. 11(3), pages 471-93, July.
  9. Coulter, Fiona A E & Cowell, Frank A & Jenkins, Stephen P, 1992. "Differences in Needs and Assessment of Income Distributions," Bulletin of Economic Research, Wiley Blackwell, vol. 44(2), pages 77-124, April.
  10. Lancaster, Geoffrey & Ray, Ranjan, 1998. "Comparison of Alternative Models of Household Equivalence Scales: The Australian Evidence on Unit Record Data," The Economic Record, The Economic Society of Australia, vol. 74(224), pages 1-14, March.
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Cited by:
  1. W.E. Griffiths & Ma. Rebecca Valenzuela, 2004. "Gibbs Samplers for a Set of Seemingly Unrelated Regressions," Department of Economics - Working Papers Series 912, The University of Melbourne.

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