Demand Systems with Unit Values: A Comparsion of Two Specifications
AbstractThe availability of quantity information along with expenditure information in some household surveys allows the estimation of price reactions on the basis of unit values. We compare two specifications that have been proposed in this context by Deaton (1990) and Crawford et al. (1997) in order to take account of quality effects reflected in the unit values. Using simulated data for a two-good model, and keeping Marshallian elasticities fixed, we compare true and pseudo-true quantity and quality elasticities. Expenditure elasticities are close, but we find large differences in price elasticities and even sign reversals. This suggests that, while convenient in the situation where prices are not observable, these specifications lack flexibility. --
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Bibliographic InfoPaper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 97-24.
Date of creation: 1997
Date of revision:
consumer demand; unit values; quality; pseudo-true values;
Other versions of this item:
- Lahatte, Agenor & Miquel, Ruth & Laisney, Francois & Preston, Ian, 1998. "Demand systems with unit values:: A comparison of two specifications," Economics Letters, Elsevier, vol. 58(3), pages 281-290, March.
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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97-06, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Ian Preston & Ian Crawford & François Laisney, 1996. "Estimation of household demand systems using unit value data," IFS Working Papers W96/16, Institute for Fiscal Studies.
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- M. Ayadi & Jaya Krishnakumar & M.S. Matoussi, 1997. "Combining Spatial and Temporal Variations in Unit Values in the Estimation of Price elasticities and Application to Tunisian Households," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 97.01, Institut d'Economie et Econométrie, Université de Genève.
- Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
- Oberhofer, W & Kmenta, J, 1974. "A General Procedure for Obtaining Maximum Likelihood Estimates in Generalized Regression Models," Econometrica, Econometric Society, vol. 42(3), pages 579-90, May.
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in: Fiscal Inclusive Development: Microsimulation Models for Latin America
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- Castañón-Herrera, Alberto & Urzúa, Carlos M., 2011. "The non-optimality of the Mexican indirect tax system," EGAP Working Papers 2011-02, Tecnológico de Monterrey, Campus Ciudad de México.
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- Crawford, Ian & Laisney, Francois & Preston, Ian, 2003. "Estimation of household demand systems with theoretically compatible Engel curves and unit value specifications," Journal of Econometrics, Elsevier, vol. 114(2), pages 221-241, June.
- Preston, Ian & Laisney, François & Crawford, Ian A., 2002. "Estimation of Household Demand Systems with Theoretically Compatible Engel Curves and Unit Value Specifications," ZEW Discussion Papers 97-06 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Vincenzo Atella & Martina Menon & Federico Perali, 2003. "Estimation of Unit Values in Cross Sections without Quantity Information and Implications for Demand and Welfare Analysis," CEIS Research Paper 12, Tor Vergata University, CEIS.
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