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Fractional Multinomial Response Models With An Application To Expenditure Shares

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  • Steven F. Koch

    (Department of Economics, University of Pretoria)

Abstract

The research presented here considers the performance of the Fractional Multinomial Logit (FMNL) model in explaining expenditure shares using data from the 2005/06 South African Income and Expenditure Survey. The results suggest that the FMNL performs favourably, when the dataset is large enough, but that it does not perform as well, when the dataset is limited. Expenditure elasticities were also estimated, and compared to the expenditure shares from a QUAIDS model. The resulting expenditure shares are fairly similar across model specification; however, the FMNL model does incorporate additional curvature, which is easily observed when comparing the QUAIDS elasticities to the FMNL elasticities.

Suggested Citation

  • Steven F. Koch, 2010. "Fractional Multinomial Response Models With An Application To Expenditure Shares," Working Papers 201021, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201021
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    References listed on IDEAS

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    1. Esmeralda A. Ramalho & Joaquim J.S. Ramalho & José M.R. Murteira, 2011. "Alternative Estimating And Testing Empirical Strategies For Fractional Regression Models," Journal of Economic Surveys, Wiley Blackwell, vol. 25(1), pages 19-68, February.
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    Cited by:

    1. Adél Bosch & Steven F. Koch, 2014. "Using a Natural Experiment to Examine Tobacco Tax Regressivity," Working Papers 434, Economic Research Southern Africa.
    2. Noviarini, Jelita & Coleman, Andrew & Roberts, Helen & Whiting, Rosalind H., 2023. "Financial literacy and retirees' resource allocation decisions in New Zealand," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    3. Fernando Arbués & María A. García-Valiñas & Inmaculada Villanúa, 2020. "Making decisions on industrial water sources: the case of Zaragoza, Spain," Post-Print hal-03191503, HAL.
    4. Allen, James E. IV, 2014. "Determinants of Land Allocation in a Multi-Crop Farming System: An Application of the Fractional Multinomial Logit Model to Agricultural Households in Mali," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170175, Agricultural and Applied Economics Association.
    5. Jianhong Mu & Bruce McCarl & Anne Wein, 2013. "Adaptation to climate change: changes in farmland use and stocking rate in the U.S," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 18(6), pages 713-730, August.
    6. John Mullahy, 2010. "Multivariate Fractional Regression Estimation of Econometric Share Models," NBER Working Papers 16354, National Bureau of Economic Research, Inc.
    7. Mark Musumba & Mjelde & Adusumilli, 2015. "Remittance receipts and allocation: a study of three African countries," Applied Economics, Taylor & Francis Journals, vol. 47(59), pages 6375-6389, December.
    8. Becker, Gideon, 2014. "The portfolio structure of German households: A multinomial fractional response approach with unobserved heterogeneity," University of Tübingen Working Papers in Business and Economics 74, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    9. Cho, Sung Ju & McCarl, Bruce A. & Wu, Ximing, 2014. "Climate Change Adaptation and Shifts in Land Use for Major Crops in the U.S," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170015, Agricultural and Applied Economics Association.
    10. Mullahy John, 2015. "Multivariate Fractional Regression Estimation of Econometric Share Models," Journal of Econometric Methods, De Gruyter, vol. 4(1), pages 1-30, January.
    11. Collart, Alba J. & Ishee, Shea G. & Coble, Keith H., 2021. "Divvying Up the Pie: U.S. Adults’ Preferences for USDA Expenditures in 2018," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 46(3), September.

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    Keywords

    Expenditure Shares; Multinomial Fractional Logit.;

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