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

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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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  • Blacklow, Paul & Nicholas, Aaron & Ray, Ranjan, 2008. "Demographic demand systems with application to equivalence scales estimation and inequality analysis: the Australian evidence," Working Papers 9289, University of Tasmania, Tasmanian School of Business and Economics, revised 01 Dec 2008.
    • Handle: RePEc:tas:wpaper:9289
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    1. Lewbel, Arthur, 1987. "Fractional demand systems," Journal of Econometrics, Elsevier, vol. 36(3), pages 311-337, November.
    2. 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, December.
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    8. Pollak, Robert A & Wales, Terence J, 1979. "Welfare Comparisons and Equivalence Scales," American Economic Review, American Economic Association, vol. 69(2), pages 216-221, May.
    9. Ray, Ranjan, 1983. "Measuring the costs of children : An alternative approach," Journal of Public Economics, Elsevier, vol. 22(1), pages 89-102, October.
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    13. Muellbauer, John, 1974. "Prices and Inequality: The United Kingdom Experience," Economic Journal, Royal Economic Society, vol. 84(333), pages 32-55, March.
    14. 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.
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    Cited by:

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    2. John Curtis & Brian Stanley, 2016. "Analysing Residential Energy Demand: An Error Correction Demand System Approach for Ireland," The Economic and Social Review, Economic and Social Studies, vol. 47(2), pages 185-211.
    3. Robin Winkler, 2015. "Feast or Famine: The Welfare Impact of Food Price Controls in Nazi Germany," Economics Series Working Papers Number 136, University of Oxford, Department of Economics.
    4. Brian P. Poi, 2012. "Easy demand-system estimation with quaids," Stata Journal, StataCorp LP, vol. 12(3), pages 433-446, September.
    5. Aleksandr Vashchilko, 2012. "Households' Expenditure Patterns in Belarus," BEROC Working Paper Series 20, Belarusian Economic Research and Outreach Center (BEROC).
    6. Li, Lianyou & Song, Ze & Ma, Chao, 2015. "Engel curves and price elasticity in urban Chinese Households," Economic Modelling, Elsevier, vol. 44(C), pages 236-242.
    7. Robin Winkler, 2015. "Feast or Famine: The Welfare Impact of Food Price Controls in Nazi Germany," Oxford Economic and Social History Working Papers _136, University of Oxford, Department of Economics.
    8. Christian Dudel & Jan Marvin Garbuszus & Julian Schmied, 2021. "Assessing differences in household needs: a comparison of approaches for the estimation of equivalence scales using German expenditure data," Empirical Economics, Springer, vol. 60(4), pages 1629-1659, April.
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    10. Shuoli Zhao & Lingxiao Wang & Wuyang Hu & Yuqing Zheng, 2023. "Meet the meatless: Demand for new generation plant‐based meat alternatives," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(1), pages 4-21, March.
    11. Gostkowski Michał, 2018. "Elasticity of Consumer Demand: Estimation Using a Quadratic Almost Ideal Demand System," Econometrics. Advances in Applied Data Analysis, Sciendo, vol. 22(1), pages 68-78, March.

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    More about this item

    Keywords

    equivalence scales; rank three demand; modified almost ideal demand system; Engel curve;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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