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Demographics in demand systems


  • Laura Blow

    () (Institute for Fiscal Studies and University of Surrey)


Household composition can be expected to affect the allocation of household expenditure among goods, at the very least because of economies of scale as household size increases and because different people have different needs (adults versus children, for example). Specifying demographic effects correctly in demand analysis is important both in order to estimate correct price and expenditure elasticities and for the purpose of making household welfare comparisons. A common way of including demographics is as a function that scales total expenditure, and to make this scaling function indepen- dent of the level of total expenditure. A popular method in the parametric estimation of demand systems is to estimate share equations that are quadratic in the logarithm of total expenditure, but there is also a substantial literature on the semi-parametric estimation of Engel curves. We employ some of these semi-parametric techniques to show that, for some goods, further terms are likely to be required in the Engel curve addition to quadratic terms. We use this to identify the parameters of a scaling function that varies with total expenditure. Keywords: Demand analysis, demographics, base independence, semi-parametric.

Suggested Citation

  • Laura Blow, 2003. "Demographics in demand systems," IFS Working Papers W03/18, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:03/18

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    References listed on IDEAS

    1. MacKinnon, James G. & White, Halbert & Davidson, Russell, 1983. "Tests for model specification in the presence of alternative hypotheses : Some further results," Journal of Econometrics, Elsevier, vol. 21(1), pages 53-70, January.
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    5. Donaldson, D. & Pendakur, K., 1999. "Equivalent-Income Functions and Income-Dependent Equivalence Scales," Discussion Papers dp99-8, Department of Economics, Simon Fraser University.
    6. Pollak, Robert A & Wales, Terence J, 1979. "Welfare Comparisons and Equivalence Scales," American Economic Review, American Economic Association, vol. 69(2), pages 216-221, May.
    7. Ray, Ranjan, 1983. "Measuring the costs of children : An alternative approach," Journal of Public Economics, Elsevier, vol. 22(1), pages 89-102, October.
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    9. 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.
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    Cited by:

    1. Michael Savage, 2016. "Indirect tax reform and the specification of demand: the case of Ireland," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 23(2), pages 368-399, April.
    2. Kamil Dybczak & Peter Tóth & David Voòka, 2014. "Effects of Price Shocks on Consumer Demand: Estimating the QUAIDS Demand System on Czech Household Budget Survey Data," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(6), pages 476-500, December.

    More about this item


    Demand analysis; demographics; base independence; semi-parametric;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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