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Estimation of Censored Demand Equations from Large Cross-Section Data

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  • Federico Perali
  • Jean-Paul Chavas

Abstract

The article develops an alternative econometric methodology to estimate a system of censored demand equations using a large cross-section data from Colombian urban households. The approach preserves the behavioralinformation expressed by zero expenditures and conforms with the requirements imposed by consumer theory in a way consistent with the random utility hypothesis. We motivate the choice of the Tobit modelas a statistical representation of consumer behavior and introduce the methodology by specifying the AIDS model modified according to both a translating and scaling demographic transformation. We propose to estimate each demand equation in unrestricted form using the jackknife technique. We then recover the demand parameters imposing the cross-equations restrictions by using minimum distance estimation. The empirical results of the censored demand system for specific households of policy relevance are reported. Copyright 2000, Oxford University Press.

Suggested Citation

  • Federico Perali & Jean-Paul Chavas, 2000. "Estimation of Censored Demand Equations from Large Cross-Section Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 1022-1037.
  • Handle: RePEc:oup:ajagec:v:82:y:2000:i:4:p:1022-1037
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    File URL: http://hdl.handle.net/10.1111/0002-9092.00100
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    1. Eom, Young Sook, 1995. "Chapter 02: SELF-PROTECTION, RISK INFORMATION, AND EX ANTE VALUES OF FOOD SAFETY AND NUTRITION," Valuing Food Safety and Nutrition (1995), Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance, number 25985.
    2. Buzby, Jean C. & Skees, Jerry R. & Ready, Richard C., 1995. "Chapter 12: USING CONTINGENT VALUATION TO VALUE FOOD SAFETY: A CASE STUDY OF GRAPEFRUIT AND PESTICIDE RESIDUES," Valuing Food Safety and Nutrition (1995), Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance, number 25972.
    3. Ravenswaay, Eileen O. van & Hoehn, John P., 1991. "Contingent Valuation and Food Safety: The Case of Pesticide Residues in Food," Staff Papers 201042, Michigan State University, Department of Agricultural, Food, and Resource Economics.
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