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Semiparametric Estimation of Consumer Demand Systems with Micro Data

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  • Sam, Abdoul G.
  • Zheng, Yi

Abstract

This article proposes a semiparametric two-step procedure for estimating a censored consumer demand system with micro data. The semiparametric estimator considered in the first step is suggested by Klein and Spady (1993). This estimator, used as a counterpart of the probit estimator in a conventional two-step model, does not make any distributional assumptions about the disturbances and so is exempt from model misspecification and plausible heteroscedasticity. In the second step, we motivate the choice of the Almost Ideal Demand System (AIDS) as an economic representation of consumers' demand behavior. Implementing our proposed semiparametric two-step procedure as well as Shonkwiler and Yen (1999)'s two-step model to a household meat consumption dataset from China generates the price and expenditure elasticities of demand. We also conducted the Horrowitz and Hardle (1994)'s specification test to our data and reject the null.

Suggested Citation

  • Sam, Abdoul G. & Zheng, Yi, 2007. "Semiparametric Estimation of Consumer Demand Systems with Micro Data," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon 9686, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea07:9686
    DOI: 10.22004/ag.econ.9686
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    Keywords

    Demand and Price Analysis;

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