Exploring the Effects of Aggregation Error in the Estimation of Consumer Demand Elasticities
Errors introduced by using aggregate data in estimating a consumer demand model have long been a concern. We study the effects of such errors on elasticity estimates derived from AIDS and QUAIDS models. Based on a survey of published articles, a generic parameterization of the income distribution, and the range of Gini coefficients reported for 28 OECD countries, we generate and analyse a large number of “observations” on the differences between elasticities calculated at the aggregate level and those calculated at the micro level. We suggest a procedure for evaluating the likely range of aggregation error when a model is estimated with aggregate data.
|Date of creation:||Dec 2007|
|Contact details of provider:|| Postal: 1280 Main Street West, Hamilton, Ontario, L8S 4M4|
Phone: (905) 525-9140 ext. 22765
Fax: (905) 521-8232
Web page: http://www.mcmaster.ca/economics/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Roland Benabou, 2000. "Unequal Societies: Income Distribution and the Social Contract," American Economic Review, American Economic Association, vol. 90(1), pages 96-129, March.
- Giancarlo Moschini & Karl D. Meilke, 1989.
"Modeling the Pattern of Structural Change in U.S. Meat Demand,"
American Journal of Agricultural Economics,
Agricultural and Applied Economics Association, vol. 71(2), pages 253-261.
- Moschini, GianCarlo & Meilke, Karl D., 1989. "Modeling the Pattern of Structural Change in U.S. Meat Demand," Staff General Research Papers Archive 11266, Iowa State University, Department of Economics.
- Stoker, Thomas M, 1984. "Completeness, Distribution Restrictions, and the Form of Aggregate Functions," Econometrica, Econometric Society, vol. 52(4), pages 887-907, July.
- Beach, Charles M & MacKinnon, James G, 1979. "Maximum Likelihood Estimation of Singular Equation Systems with Autoregressive Disturbances," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 459-464, June.
- Charles M. Beach & James G. MacKinnon, 1977. "Maximum Likelihood Estimation of Singular Equation Systems with Autoregressive Disturbances," Working Papers 276, Queen's University, Department of Economics.
- Blundell, Richard & Robin, Jean Marc, 1999. "Estimation in Large and Disaggregated Demand Systems: An Estimator for Conditionally Linear Systems," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(3), pages 209-232, May-June.
- R, Blundell & Jean-Marc Robin, 1997. "Estimation in Large and Dissagregated Demand Systems : An Estimator for Conditionally Linear Systems," Working Papers 97-08, Centre de Recherche en Economie et Statistique.
- Richard Blundell & Jean-Marc Robin, 1999. "Estimation in large and disaggregated demand systems: an estimator for conditionally linear systems," Post-Print hal-00359353, HAL.
- Duffy, Martyn, 2003. "Advertising and food, drink and tobacco consumption in the United Kingdom: a dynamic demand system," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 28(1), January.
- Frank Denton & Dean Mountain, 2004. "Aggregation effects on price and expenditure elasticities in a quadratic almost ideal demand system," Canadian Journal of Economics, Canadian Economics Association, vol. 37(3), pages 613-628, August.
- Frank T. Denton & Dean C. Mountain, 2002. "Aggregation Effects on Price and Expenditure Elasticities in a Quadratic Almost Ideal Demand System," Quantitative Studies in Economics and Population Research Reports 374, McMaster University.
- Frank T. Denton & Dean C. Mountain & Byron G Spencer, 2006. "Errors of aggregation and errors of specification in a consumer demand model: a theoretical note," Canadian Journal of Economics, Canadian Economics Association, vol. 39(4), pages 1398-1407, November.
- Gordon Anderson & Richard Blundell, 1983. "Testing Restrictions in a Flexible Dynamic Demand System: An Application to Consumers' Expenditure in Canada," Review of Economic Studies, Oxford University Press, vol. 50(3), pages 397-410.
- Stoker, Thomas M, 1993. "Empirical Approaches to the Problem of Aggregation Over Individuals," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1827-1874, December.
- Ray, Ranjan, 1980. "Analysis of a Time Series of Household Expenditure Surveys for India," The Review of Economics and Statistics, MIT Press, vol. 62(4), pages 595-602, November.
- Heien, Dale & Wessells, Cathy Roheim, 1990. "Demand Systems Estimation with Microdata: A Censored Regression Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(3), pages 365-371, July.
- 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.
- Lewbel, Arthur, 1990. "Income distribution movements and aggregate money illusion," Journal of Econometrics, Elsevier, vol. 43(1-2), pages 35-42.
- Giannis Karagiannis & Kostas Velentzas, 2004. "Decomposition analysis of consumers' demand changes: an application to Greek consumption data," Applied Economics, Taylor & Francis Journals, vol. 36(5), pages 497-504.
- Blanciforti, Laura & Green, Richard, 1983. "An Almost Ideal Demand System Incorporating Habits: An Analysis of Expenditures on Food and Aggregate Commodity Groups," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 511-515, August.
- Blundell, Richard & Pashardes, Panos & Weber, Guglielmo, 1993. "What Do We Learn About Consumer Demand Patterns from Micro Data?," American Economic Review, American Economic Association, vol. 83(3), pages 570-597, June.
- Brenda L. Boetel & Donald J. Liu, 2003. "Evaluating the effect of generic advertising and food health information within a meat demand system," Agribusiness, John Wiley & Sons, Ltd., vol. 19(3), pages 345-354.
- Denton, Frank T & Mountain, Dean C & Spencer, Byron G, 1999. "Age, Trend, and Cohort Effects in a Macro Model of Canadian Expenditure Patterns," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(4), pages 430-443, October.
- Luo, Guo Ying, 2002. "Collective Decision-Making and Heterogeneity in Tastes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 213-226, April.
- Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
- Toshinobu Matsuda, 2006. "Linear approximations to the quadratic almost ideal demand system," Empirical Economics, Springer, vol. 31(3), pages 663-675, September.
- Denton, Frank T. & Mountain, Dean C., 2001. "Income distribution and aggregation/disaggregation biases in the measurement of consumer demand elasticities," Economics Letters, Elsevier, vol. 73(1), pages 21-28, October.
- Stoker, Thomas M, 1986. "Simple Tests of Distributional Effects on Macroeconomic Equations," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 763-795, August.
- Duffy, Martyn, 2003. "Advertising and food, drink and tobacco consumption in the United Kingdom: a dynamic demand system," Agricultural Economics, Blackwell, vol. 28(1), pages 51-70, January.
- Arthur Lewbel, 1992. "Aggregation with Log-Linear Models," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 635-642. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:mcm:sedapp:226. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.