Inferential methods for elasticity estimates
Elasticities are often estimated from the results of demand analysis. However, drawing inferences from them may involve assumptions that could influence the outcome. In this paper we investigate one of the most common forms of elasticity which is defined as a ratio of estimated relationships and demonstrate how the Fieller method for the construction of confidence intervals can be used to draw inferences. We estimate the elasticities of expenditure from Engel curves using a variety of estimation models. Parametric Engel curves are modelled using OLS, MM robust regression, and Tobit. Semiparametric Engel curves are estimated using a penalized spline regression. We demonstrate the construction of confidence intervals of the expenditure elasticities for a series of expenditure levels as well as the estimated cumulative density function for the elasticity evaluated for a particular household.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Barnett, William A, 1983. "New Indices of Money Supply and the Flexible Laurent Demand System," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(1), pages 7-23, January.
- Melenberg, B. & van Soest, A.H.O., 1991.
"Parametric and semi-parametric modelling of vacation expenditures,"
1991-44, Tilburg University, Center for Economic Research.
- Melenberg, Bertrand & van Soest, Arthur, 1996. "Parametric and Semi-parametric Modelling of Vacation Expenditures," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(1), pages 59-76, Jan.-Feb..
- Melenberg, B. & van Soest, A.H.O., 1996. "Parametric and semi-parametric modelling of vacation expenditures," Other publications TiSEM 14de3e83-71c1-4e9a-aa5e-3, Tilburg University, School of Economics and Management.
- Melenberg, B. & Van Soest, A., 1991. "Parametric and Semi-parametric Modelling of Vocation Expenditures," Papers 9144, Tilburg - Center for Economic Research.
- Tansel, AysIt & Bircan, Fatma, 2006. "Demand for education in Turkey: A tobit analysis of private tutoring expenditures," Economics of Education Review, Elsevier, vol. 25(3), pages 303-313, June.
- Daniel Polsky & Henry A. Glick & Richard Willke & Kevin Schulman, 1997. "Confidence Intervals for Cost-Effectiveness Ratios: A Comparison of Four Methods," Health Economics, John Wiley & Sons, Ltd., vol. 6(3), pages 243-252.
- Alan, Sule & Crossley, Thomas F. & Grootendorst, Paul & Veall, Michael R., 2002.
"The effects of drug subsidies on out-of-pocket prescription drug expenditures by seniors: regional evidence from Canada,"
Journal of Health Economics,
Elsevier, vol. 21(5), pages 805-826, September.
- Thomas F. Crossley & Paul Grootendorst & Sule Korkmaz & Michael R. Veall, 2000. "The Effects of Drug Subsidies on Out-of Pocket Prescription Drug Expenditures by Seniors: Regional Evidence from Canada," Social and Economic Dimensions of an Aging Population Research Papers 19, McMaster University.
- Thomas F. Crossley & Paul Grootendorst & Sule Kokkmaz & Michael R. Veall, 2000. "The Effects of Drug Subsidies on Out-of-Poket Prescription Drug Expenditures by seniors: regional Evidence from Canada," CEPR Discussion Papers 422, Centre for Economic Policy Research, Research School of Economics, Australian National University.
- Thomas F. Crossley & Paul Grootendorst & Sule Korkmaz & Michael R. Veall, 2000. "The Effects of Drug Subsidies on Out-of Pocket Prescription Drug Expenditures by Seniors: Regional Evidence from Canada," Quantitative Studies in Economics and Population Research Reports 350, McMaster University.
- Kling, Catherine L. & Dorfman, Jeffrey & Sexton, Richard, 1990.
"Confidence Intervals for Elasticities and Flexibilities: Re-Evaluating the Ratios of Normals Case,"
Staff General Research Papers Archive
1582, Iowa State University, Department of Economics.
- Jeffrey H. Dorfman & Catherine L. Kling & Richard J. Sexton, 1990. "Confidence Intervals for Elasticities and Flexibilities: Reevaluating the Ratios of Normals Case," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(4), pages 1006-1017.
- Jean-Thomas Bernard & Nadhem Idoudi & Lynda Khalaf & Clément Yélou, 2007. "Finite sample inference methods for dynamic energy demand models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1211-1226.
- Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-844, September.
- McDonald, John F & Moffitt, Robert A, 1980. "The Uses of Tobit Analysis," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 318-321, May.
- Koenker,Roger, 2005.
Cambridge University Press, number 9780521608275, December.
- Sonia Bhalotra & Cliff Attfield, 1998.
"Intrahousehold resource allocation in rural Pakistan: a semiparametric analysis,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 13(5), pages 463-480.
- Sonia Bhalotra & Cliff Attfield, 1998. "Intrahousehold resource allocation in rural Pakistan: a semi-parametric analysis," LSE Research Online Documents on Economics 6679, London School of Economics and Political Science, LSE Library.
- Cliff Attfield & Sonia R Bhalotra, 1998. "Intrahousehold Resource Allocation in Rural Pakistan: A Semi-parametric Analysis," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 11, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Hongyi Li & G. S. Maddala, 1999. "Bootstrap Variance Estimation Of Nonlinear Functions Of Parameters: An Application To Long-Run Elasticities Of Energy Demand," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 728-733, November.
- J.G. Hirschberg & J. N. Lye, 2007. "Providing Intuition to the Fieller Method with Two Geometric Representations using STATA and Eviews," Department of Economics - Working Papers Series 992, The University of Melbourne.
- Richard Blundell & Alan Duncan & Krishna Pendakur, 1998. "Semiparametric estimation and consumer demand," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(5), pages 435-461.
- Davidson, Russell & MacKinnon, James G, 1999.
"Bootstrap Testing in Nonlinear Models,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 487-508, May.
- Ruppert,David & Wand,M. P. & Carroll,R. J., 2003. "Semiparametric Regression," Cambridge Books, Cambridge University Press, number 9780521785167, December.
- Ping Zhang & Arthur van Soest & Xiaodong Gong, 2005. "The effects of the gender of children on expenditure patterns in rural China: a semiparametric analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 509-527.
- Deaton, Angus & Irish, Margaret, 1984. "Statistical models for zero expenditures in household budgets," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 59-80.
- Joseph G. Hirschberg & Jenny N. Lye, 2004. "Inferences for the Extremum of Quadratic Regression Models," Department of Economics - Working Papers Series 906, The University of Melbourne.
- Krinsky, Itzhak & Robb, A Leslie, 1991. "Three Methods for Calculating the Statistical Properties of Elasticities: A Comparison," Empirical Economics, Springer, vol. 16(2), pages 199-209.
- Krinsky, Itzhak & Robb, A Leslie, 1986. "On Approximating the Statistical Properties of Elasticities," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 715-719, November.
- Ruppert,David & Wand,M. P. & Carroll,R. J., 2003. "Semiparametric Regression," Cambridge Books, Cambridge University Press, number 9780521780506, December.
- Jiazhong You, 2003. "Robust estimation of models of Engel curves," Empirical Economics, Springer, vol. 28(1), pages 61-73, January.
When requesting a correction, please mention this item's handle: RePEc:eee:econom:v:147:y:2008:i:2:p:299-315. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.