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Demand Systems with Unit Values: A Comparsion of Two Specifications

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  • Lahatte, Agénor
  • Miquel, Ruth
  • Laisney, François
  • Preston, Ian

Abstract

The availability of quantity information along with expenditure information in some household surveys allows the estimation of price reactions on the basis of unit values. We compare two specifications that have been proposed in this context by Deaton (1990) and Crawford et al. (1997) in order to take account of quality effects reflected in the unit values. Using simulated data for a two-good model, and keeping Marshallian elasticities fixed, we compare true and pseudo-true quantity and quality elasticities. Expenditure elasticities are close, but we find large differences in price elasticities and even sign reversals. This suggests that, while convenient in the situation where prices are not observable, these specifications lack flexibility.

Suggested Citation

  • Lahatte, Agénor & Miquel, Ruth & Laisney, François & Preston, Ian, 1997. "Demand Systems with Unit Values: A Comparsion of Two Specifications," ZEW Discussion Papers 97-24, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:9724
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    References listed on IDEAS

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    1. Deaton, Angus, 1987. "Estimation of own- and cross-price elasticities from household survey data," Journal of Econometrics, Elsevier, vol. 36(1-2), pages 7-30.
    2. Ian Preston & Ian Crawford & Francois Laisney, 1996. "Estimation of household demand systems using unit value data," IFS Working Papers W96/16, Institute for Fiscal Studies.
    3. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    4. Deaton, Angus, 1988. "Quality, Quantity, and Spatial Variation of Price," American Economic Review, American Economic Association, vol. 78(3), pages 418-430, June.
    5. Angus Deaton, 1991. "Price Elasticities from Survey Data: Extensions and Indonesian Results," International Economic Association Series, in: Marc Nerlove (ed.), Issues in Contemporary Economics, chapter 10, pages 253-283, Palgrave Macmillan.
    6. Oberhofer, W & Kmenta, J, 1974. "A General Procedure for Obtaining Maximum Likelihood Estimates in Generalized Regression Models," Econometrica, Econometric Society, vol. 42(3), pages 579-590, May.
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    Cited by:

    1. Crawford, Ian & Laisney, Francois & Preston, Ian, 2003. "Estimation of household demand systems with theoretically compatible Engel curves and unit value specifications," Journal of Econometrics, Elsevier, vol. 114(2), pages 221-241, June.
    2. Marie-Charlotte BUISSON, 2012. "Allocation du temps de travail des femmes au Sénégal - Travaux domestiques et activités génératrices de revenus," Working Papers 201209, CERDI.
    3. Castañon-Herrera, Alberto & Urzúa, Carlos M., 2012. "The non-optimality of the Mexican indirect tax system," EGAP Chapters, in: Urzúa, Carlos M. (ed.), Fiscal Inclusive Development: Microsimulation Models for Latin America, Tecnológico de Monterrey, Campus Ciudad de México.
    4. Agénor Lahatte, 2010. "Autocorrélation spatiale et modèle de demande traitant des valeurs unitaires," Économie et Prévision, Programme National Persée, vol. 193(2), pages 101-117.
    5. Rachel Griffith & Lars Nesheim, 2010. "Estimating households' willingness to pay," CeMMAP working papers CWP24/10, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    6. Marie-Charlotte Buisson, 2012. "Allocation du temps de travail des femmes au Sénégal - Travaux domestiques et activités génératrices de revenus," CERDI Working papers halshs-00673119, HAL.
    7. Berges, Miriam & Pace Guerrero, Ignacio & Echeverría, Lucía, 2012. "La utilización de precios implícitos o de pseudo precios implícitos en la estimación de un sistema de demandas QUAIDS para alimentos," Nülan. Deposited Documents 1675, Universidad Nacional de Mar del Plata, Facultad de Ciencias Económicas y Sociales, Centro de Documentación.
    8. Vincenzo Atella & Martina Menon & Federico Perali, 2003. "Estimation of Unit Values in Cross Sections without Quantity Information and Implications for Demand and Welfare Analysis," CEIS Research Paper 12, Tor Vergata University, CEIS.

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    More about this item

    Keywords

    consumer demand; unit values; quality; pseudo-true values;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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