Demand systems with unit values:: A comparison of two specifications
The 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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- Deaton, A., 1988.
"Price Elasticities From Survey Data: Extensions And Indonesian Results,"
138, Princeton, Woodrow Wilson School - Development Studies.
- Deaton, Angus, 1990. "Price elasticities from survey data : Extensions and Indonesian results," Journal of Econometrics, Elsevier, vol. 44(3), pages 281-309, June.
- Deaton, A., 1990. "Price Elasticities From Surveys Data: Extensions And Indonesian Results," Papers 69, World Bank - Living Standards Measurement.
- 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, December.
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- Deaton, Angus, 1988.
"Quality, Quantity, and Spatial Variation of Price,"
American Economic Review,
American Economic Association, vol. 78(3), pages 418-30, June.
- Ian Preston & Ian Crawford & Francois Laisney, 1996.
"Estimation of household demand systems using unit value data,"
IFS Working Papers
W96/16, Institute for Fiscal Studies.
- Preston, Ian & Laisney, François & Crawford, Ian A., 1997. "Estimation of Household Demand Systems Using Unit Value Data," ZEW Discussion Papers 97-06, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- 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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