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Panel and Pseudo-Panel Estimation of Cross-Sectional and Time Series Elasticities of Food Consumption: The Case of American and Polish Data

  • François Gardes

    (CERMSEM - CEntre de Recherche en Mathématiques, Statistique et Économie Mathématique - CNRS : UMR8095 - Université Paris I - Panthéon-Sorbonne)

  • Greg Duncan

    (Northwestern U. - Northwestern University)

  • Patrice Gaubert

    ()

    (SAMOS - Statistique Appliquée et MOdélisation Stochastique - Université Paris I - Panthéon-Sorbonne)

  • Marc Gurgand

    (DELTA - Département et Laboratoire d'Economie Théorique et Appliquée - CNRS : UMR8545 - École normale supérieure [ENS] - Paris - École des Hautes Études en Sciences Sociales (EHESS))

  • Christophe Starzec

    (TEAM - Théories et Applications en Microéconomie et Macroéconomie - CNRS : UMR8059 - Université Paris I - Panthéon-Sorbonne)

The problem addressed in this article is the bias to income and expenditure elasticities estimated on pseudo-panel data caused by measurement error and unobserved heterogeneity. We gauge empirically these biases by comparing cross-sectional, pseudo-panel and true panel data from both Polish and American expenditure surveys. Our results suggest that unobserved heterogeneity imparts a downward bias to cross-section estimates of income elasticities of at-home food expenditures and an upward bias to estimates of income elasticities of away-from-home food expenditures. "Within" and first-difference estimators suffer less bias, but only if the effects of measurement error are accounted for with instrumental variables.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00176109.

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Date of creation: Apr 2005
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Publication status: Published, Journal of Business & Economic Statistics, 2005, 23, 2, 242-253
Handle: RePEc:hal:cesptp:hal-00176109
Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00176109
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  1. Baltagi, Badi H., 1988. "An Alternative Heteroscedastic Error Components Model," Econometric Theory, Cambridge University Press, vol. 4(02), pages 349-350, August.
  2. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
  3. Gardes, Francois & Langlois, Simon & Richaudeau, Didier, 1996. "Cross-section versus time-series income elasticities of Canadian consumption," Economics Letters, Elsevier, vol. 51(2), pages 169-175, May.
  4. Arellano, Manuel, 1989. "A note on the Anderson-Hsiao estimator for panel data," Economics Letters, Elsevier, vol. 31(4), pages 337-341, December.
  5. Verbeek, Marno & Nijman, Theo, 1993. "Minimum MSE estimation of a regression model with fixed effects from a series of cross-sections," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 125-136, September.
  6. Altonji, Joseph G & Siow, Aloysius, 1987. "Testing the Response of Consumption to Income Changes with (Noisy) Panel Data," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 293-328, May.
  7. Hall, Robert E & Mishkin, Frederic S, 1982. "The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households," Econometrica, Econometric Society, vol. 50(2), pages 461-81, March.
  8. Stephen Zeldes, . "Consumption and Liquidity Constraints: An Empirical Investigation," Rodney L. White Center for Financial Research Working Papers 24-85, Wharton School Rodney L. White Center for Financial Research.
  9. Naik, Narayan Y & Moore, Michael J, 1996. "Habit Formation and Intertemporal Substitution in Individual Food Consumption," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 321-28, May.
  10. Nijman, T.E. & Verbeek, M.J.C.M., 1993. "Minimum MSE estimation of a regression model with fixed effects from a series of cross sections," Other publications TiSEM 34c1104a-a64b-4030-be99-b, Tilburg University, School of Economics and Management.
  11. repec:ner:tilbur:urn:nbn:nl:ui:12-153277 is not listed on IDEAS
  12. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
  13. Moffitt, Robert, 1993. "Identification and estimation of dynamic models with a time series of repeated cross-sections," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 99-123, September.
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