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Estimation of Censored Demand Equations from Large Cross-Section Data


  • Federico Perali
  • Jean-Paul Chavas


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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