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Censored Demand System Estimation with Endogenous Expenditures in clustered samples: an application to food demand in urban Mozambique

We address the issue of endogenous expenditures in the context of a censored demand system by an augmented regression approach estimated with a two-step estimator. An application to food demand by urban households in Mozambique shows that accounting for endogeneity is potentially important in obtaining reliable point estimates of price and, in particular, expenditure elasticities. Furthermore, a bootstrap approach to obtain confidence intervals when data are clustered - as is the case with most household surveys - is devised. Based on a Monte Carlo exercise we speculate that previous studies in failing to account for the clustered nature of the data overstate the precision with which elasticities are estimated.

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Paper provided by LICOS - Centre for Institutions and Economic Performance, KU Leuven in its series LICOS Discussion Papers with number 28011.

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Date of creation: 2011
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Handle: RePEc:lic:licosd:28011
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  1. Tarp Jensen, Henning & Tarp, Finn, 2001. "On the Choice of Appropriate Development Strategy: Insights from CGE Modelling of the Mozambican Economy," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
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  4. Blundell & Robin, 1999. "Estimation in large and disaggregated demand systems : an estimator for conditionally linear systems," Working Papers 156380, Institut National de la Recherche Agronomique, France.
  5. Yen, Steven T. & Lin, Biing-Hwan, 2004. "A Sample Selection Approach To Censored Demand Systems," 2004 Annual meeting, August 1-4, Denver, CO 20082, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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  7. Millimet, Daniel L. & Tchernis, Rusty, 2008. "Estimating high-dimensional demand systems in the presence of many binding non-negativity constraints," Journal of Econometrics, Elsevier, vol. 147(2), pages 384-395, December.
  8. Yoko Niimi, 2005. "An Analysis of Household Responses to Price Shocks in Vietnam: Can Unit Values Substitute for Market Prices?," PRUS Working Papers 30, Poverty Research Unit at Sussex, University of Sussex.
  9. SĂ©bastien Lecocq & Jean-Marc Robin, 2006. "Estimating Demand Response with Panel Data," Empirical Economics, Springer, vol. 31(4), pages 1043-1060, November.
  10. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1975. "Transcendental Logarithmic Utility Functions," American Economic Review, American Economic Association, vol. 65(3), pages 367-83, June.
  11. 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.
  12. Steven T. Yen, 2002. "Beverage consumption among US children and adolescents: full-information and quasi maximum-likelihood estimation of a censored system," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 29(1), pages 85-104, March.
  13. Murphy, Kevin M & Topel, Robert H, 2002. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 88-97, January.
  14. Steven T. Yen, 2005. "A Multivariate Sample-Selection Model: Estimating Cigarette and Alcohol Demands with Zero Observations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(2), pages 453-466.
  15. J. Scott Shonkwiler & Steven T. Yen, 1999. "Two-Step Estimation of a Censored System of Equations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 972-982.
  16. David E. Sahn, 2005. "Consistent Estimation of Censored Demand Systems Using Panel Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 660-672.
  17. Diansheng Dong & Brian W. Gould & Harry M. Kaiser, 2004. "Food Demand in Mexico: An Application of the Amemiya-Tobin Approach to the Estimation of a Censored Food System," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(4), pages 1094-1107.
  18. Panagiotis Lazaridis, 2003. "Household meat demand in Greece: A demand systems approach using microdata," Agribusiness, John Wiley & Sons, Ltd., vol. 19(1), pages 43-59.
  19. Biing-Hwan Lin & Steven T. Yen & Diansheng Dong & David M. Smallwood, 2010. "Economic Incentives For Dietary Improvement Among Food Stamp Recipients," Contemporary Economic Policy, Western Economic Association International, vol. 28(4), pages 524-536, October.
  20. Yen, Steven T. & Fang, Cheng & Su, Shew-Jiuan, 2004. "Household food demand in urban China: a censored system approach," Journal of Comparative Economics, Elsevier, vol. 32(3), pages 564-585, September.
  21. Panagiotis Lazaridis, 2004. "Demand elasticities derived from consistent estimation of Heckman-type models," Applied Economics Letters, Taylor & Francis Journals, vol. 11(8), pages 523-527.
  22. Cuma Akbay & Ismet Boz & Wen S. Chern, 2007. "Household food consumption in Turkey," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 34(2), pages 209-231, June.
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