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Demographic demand systems with application to equivalence scales estimation and inequality analysis: the Australian evidence

This paper proposes and applies an alternative demographic procedure for extending a demand system to allow for the effect of household size and composition changes, along with price changes, on expenditure allocation. The demographic procedure is applied to two recent demand functional forms to obtain their estimable demographic extensions. The estimation on pooled time series of Australian Household Expenditure Surveys yields sensible and robust estimates of the equivalence scale, and of its variation with relative prices. Further evidence on the usefulness of this procedure is provided by using it to evaluate the nature and magnitude of the inequality bias of relative price changes in Australia over a period from the late 1980s to the early part of the new millennium.

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File URL: http://eprints.utas.edu.au/9289/1/DP2008_No_07_Blacklow_Nicholas_Ray.pdf
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Paper provided by University of Tasmania, School of Economics and Finance in its series Working Papers with number 9289.

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Length: 27 pages
Date of creation: 01 Dec 2008
Date of revision: 01 Dec 2008
Publication status: Published by the University of Tasmania. Discussion Paper 2008-07
Handle: RePEc:tas:wpaper:9289
Contact details of provider: Postal: Private Bag 85, Hobart, Tasmania 7001
Phone: +61 3 6226 7672
Fax: +61 3 6226 7587
Web page: http://www.utas.edu.au/economics-finance/

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  1. Arthur Lewbel & Krishna Pendakur, 2008. "Estimation of Collective Household Models With Engel Curves," Boston College Working Papers in Economics 694, Boston College Department of Economics.
  2. Blacklow, Paul & Cooper, Russell & Ham, Roger & McLaren, Keith, 2007. "A Regular Demand System with Commodity-Specific Demographic Effects," Working Papers 818, University of Tasmania, School of Economics and Finance.
  3. Russel J. Cooper & Keith R. McLaren, 1992. "An Empirically Oriented Demand System with Improved Regularity Properties," Canadian Journal of Economics, Canadian Economics Association, vol. 25(3), pages 652-68, August.
  4. Lancaster, Geoffrey & Ray, Ranjan & Valenzuela, Maria Rebecca, 1999. "A Cross-Country Study of Household Poverty and Inequality on Unit Record Household Budget Data," Economic Development and Cultural Change, University of Chicago Press, vol. 48(1), pages 177-208, October.
  5. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
  6. Pendakur, K., 1999. "Taking Prices Seriously in the Measurement of Inequality," Discussion Papers dp99-7, Department of Economics, Simon Fraser University.
  7. Muellbauer, John, 1974. "Prices and Inequality: The United Kingdom Experience," Economic Journal, Royal Economic Society, vol. 84(333), pages 32-55, March.
  8. Ray, Ranjan, 1983. "Measuring the costs of children : An alternative approach," Journal of Public Economics, Elsevier, vol. 22(1), pages 89-102, October.
  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.
  10. Paul Blacklow & Ranjan Ray, 2000. "A Comparison of Income and Expenditure Inequality Estimates: The Australian Evidence, 1975-76 to 1993-94," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 33(4), pages 317-329.
  11. Pollak, Robert A & Wales, Terence J, 1979. "Welfare Comparisons and Equivalence Scales," American Economic Review, American Economic Association, vol. 69(2), pages 216-21, May.
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