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The rank and model specification of demand systems: an empirical analysis using United States microdata

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  • Christopher J. Nicol

Abstract

A rank-three demand system is estimated with United States Consumer Expenditure Survey microdata. A unique price data set is also used, which permits the analysis of effects of systematic errors in price variables. It is found that errors in price variables bias test results for the rank-three hypothesis, in particular towards rejection. Other test results are affected to a lesser extent. Estimating smaller systems of demand equations, even when conditioning on excluded goods, yields significantly different results. Another important conclusion is that model specification is statistically significantly different for households of varying family sizes and housing tenure statuses.

Suggested Citation

  • Christopher J. Nicol, 2001. "The rank and model specification of demand systems: an empirical analysis using United States microdata," Canadian Journal of Economics, Canadian Economics Association, vol. 34(1), pages 259-289, February.
  • Handle: RePEc:cje:issued:v:34:y:2001:i:1:p:259-289
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    Citations

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    Cited by:

    1. Nicol, C. J., 2003. "Elasticities of demand for gasoline in Canada and the United States," Energy Economics, Elsevier, vol. 25(2), pages 201-214, March.
    2. Xavier Labandeira & José M. Labeaga & Miguel Rodríguez, 2006. "A Residential Energy Demand System for Spain," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 87-112.
    3. Fortuna, Natercia, 2008. "Local rank tests in a multivariate nonparametric relationship," Journal of Econometrics, Elsevier, vol. 142(1), pages 162-182, January.
    4. Donald, Stephen G. & Fortuna, Natércia & Pipiras, Vladas, 2011. "Local and Global Rank Tests for Multivariate Varying-Coefficient Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(2), pages 295-306.
    5. Tiezzi, Silvia & Verde, Stefano F., 2016. "Differential demand response to gasoline taxes and gasoline prices in the U.S," Resource and Energy Economics, Elsevier, vol. 44(C), pages 71-91.
    6. Lyssiotou, Panayiota, 2012. "Demographics and demand: Evaluation of alternative functional forms," Economics Letters, Elsevier, vol. 117(3), pages 627-631.
    7. Takashi Unayama, 2006. "The Engel curve for alcohol and the rank of demand systems," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(7), pages 1019-1038.

    More about this item

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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