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Engel Functions, Panel Data, and Latent Variables

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  • Aasness, Jorgen
  • Biorn, Erik
  • Skjerpen, Terje

Abstract

Systems of consumer expenditure functions are estimated from Norwegian household panel data. Total consumption expenditure is modeled as a latent variable, as indicators of it are purchase expenditures on different goods and two income measures. The usual assumption of no measurement error in total expenditure is clearly rejected while a parsimonious alternative is not. The authors test hypotheses regarding the distribution of measurement errors, the evolution of the distribution of latent total expenditure across households, the distribution of individual differences in preferences, and the possible correlation between preferences and latent total expenditure. Copyright 1993 by The Econometric Society.

Suggested Citation

  • Aasness, Jorgen & Biorn, Erik & Skjerpen, Terje, 1993. "Engel Functions, Panel Data, and Latent Variables," Econometrica, Econometric Society, vol. 61(6), pages 1395-1422, November.
    • Handle: RePEc:ecm:emetrp:v:61:y:1993:i:6:p:1395-1422
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    Citations

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    Cited by:

    1. Mette Lunde Christensen, 2002. "Heterogeneity in consumer demands and the income effect: evidence from panel data," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C4-1, International Conferences on Panel Data.
    2. Jørgen Aasness & Odd Erik Nygård, 2009. "Revenue functions and Dupuit curves for indirect taxes with cross-border shopping," Discussion Papers 573, Statistics Norway, Research Department.
    3. Weber, Christopher L. & Matthews, H. Scott, 2008. "Quantifying the global and distributional aspects of American household carbon footprint," Ecological Economics, Elsevier, vol. 66(2-3), pages 379-391, June.
    4. Erling Holmøy, 1998. "A General Equilibrium Evaluation of Aggregate Welfare Effects from Improved Sectoral Efficiency . Empirical Evidence for Norway," Discussion Papers 224, Statistics Norway, Research Department.
    5. Jørgen Aasness & Odd Nygård, 2014. "Revenue functions and Dupuit curves for indirect taxes with cross-border shopping," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(2), pages 272-297, April.
    6. Biørn, Erik, 2017. "Identification and Method of Moments Estimation in Polynomial Measurement Error Models," Memorandum 01/2017, Oslo University, Department of Economics.
    7. Ornetzeder, Michael & Hertwich, Edgar G. & Hubacek, Klaus & Korytarova, Katarina & Haas, Willi, 2008. "The environmental effect of car-free housing: A case in Vienna," Ecological Economics, Elsevier, vol. 65(3), pages 516-530, April.
    8. Erling Røed Larsen, 2006. "Distributional effects of environmental taxes on transportation: evidence from Engel curves in the United States," Journal of Consumer Policy, Springer, vol. 29(3), pages 301-318, September.
    9. Bernt P. Stigum, 2000. "Rationality in Econometrics," Econometric Society World Congress 2000 Contributed Papers 0747, Econometric Society.
    10. Holmoy, Erling & Vennemo, Haakon, 1995. "A general equilibrium assessment of a suggested reform in capital income taxation," Journal of Policy Modeling, Elsevier, vol. 17(6), pages 531-556, December.
    11. Erling Larsen, 2009. "Using inverted Engel curves to estimate material standards of living in a household," Empirical Economics, Springer, vol. 36(1), pages 109-132, February.
    12. Daniel Wilhelm, 2015. "Identification and estimation of nonparametric panel data regressions with measurement error," CeMMAP working papers CWP34/15, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    13. Song, Suyong, 2015. "Semiparametric estimation of models with conditional moment restrictions in the presence of nonclassical measurement errors," Journal of Econometrics, Elsevier, vol. 185(1), pages 95-109.
    14. Dario Cziráky, 2004. "LISREL 8.54: A program for structural equation modelling with latent variables," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(1), pages 135-141.
    15. Terje Skjerpen, 2008. "Engel elasticities, pseudo-maximum likelihood estimation and bootstrapped standard errors. A case study," Discussion Papers 532, Statistics Norway, Research Department.
    16. Eva Ventura & Albert Satorra, 1998. "Lyfe-cycle effects on household expenditures: A latent-variable approach," Economics Working Papers 354, Department of Economics and Business, Universitat Pompeu Fabra.
    17. Roberto ESPOSTI, 2007. "On the Decline of Agriculture. Evidence from Italian Regions in the Post-WWII Period," Working Papers 300, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    18. Zhu, Yu, 2002. "Latent total consumption expenditure, unobservable individual preferences and panel data," Economic Modelling, Elsevier, vol. 19(2), pages 277-293, March.

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