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Estimation of Tobit Type Censored Demand Systems: A Comparison of Estimators

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  • Mikkel Barslund

    (Department of Economics, University of Copenhagen)

Abstract

Recently a number of authors have suggested to estimate censored demand systems as a system of Tobit multivariate equations employing a Quasi Maximum Likelihood (QML) estimator based on bivariate Tobit models. In this paper I study the efficiency of this QML estimator relative to the asymptotically more efficient Simulated ML (SML) estimator in the context of a censored Almost Ideal demand system. Further, a simpler QML estimator based on the sum of univariate Tobit models is introduced. A Monte Carlo simulation comparing the three estimators is performed on three different sample sizes. The QML estimators perform well in the presence of moderate sized error correlation coefficients often found in empirical studies. With absolute larger correlation coefficients, the SML estimator is found to be superior. The paper lends support to the general use of the QML estimators and points towards the use of simple etimators for more general censored systems of equations.

Suggested Citation

  • Mikkel Barslund, 2007. "Estimation of Tobit Type Censored Demand Systems: A Comparison of Estimators," Discussion Papers 07-16, University of Copenhagen. Department of Economics.
  • Handle: RePEc:kud:kuiedp:0716
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    Cited by:

    1. Brown, Sarah & Harris, Mark N. & Taylor, Karl, 2012. "Modelling charitable donations to an unexpected natural disaster: Evidence from the U.S. Panel Study of Income Dynamics," Journal of Economic Behavior & Organization, Elsevier, vol. 84(1), pages 97-110.
    2. Backus, Peter, 2010. "Is charity a homogeneous good?," The Warwick Economics Research Paper Series (TWERPS) 951, University of Warwick, Department of Economics.
    3. Tim Pawlowski & Christoph Breuer, 2012. "Expenditure elasticities of the demand for leisure services," Applied Economics, Taylor & Francis Journals, vol. 44(26), pages 3461-3477, September.
    4. Silvia Pasqua & Anna Laura Mancini, 2012. "Asymmetries and interdependencies in time use between Italian parents," Applied Economics, Taylor & Francis Journals, vol. 44(32), pages 4153-4171, November.
    5. VERHEYDEN Bertrand & FAYE Ousmane, 2011. "Fertility and Child Occupation: Theory and Evidence from Senegal," LISER Working Paper Series 2011-59, LISER.
    6. Kuhlgatz, Christian & Abdulai, Awudu & Barrett, Christopher B., 2009. "Food Aid Allocation Policies: Donor Coordination and Responsiveness to the Needs of Recipient Countries," 2009 Conference, August 16-22, 2009, Beijing, China 51686, International Association of Agricultural Economists.
    7. Khanal, Narayan Prasad & Maharjan, Keshav Lall, 2015. "Climatic and Socio-Economic Factors Influencing the Adoption of Spring Crops under Rice-Wheat System: A Case Study in the Tarai Region of Nepal," 2015 Conference, August 9-14, 2015, Milan, Italy 229068, International Association of Agricultural Economists.

    More about this item

    Keywords

    censored demand system; Monte Carlo; quasi maximum likelihood; simulated maximum likelihood;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models

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