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Demand Systems with Unit Values: A Comparsion of Two Specifications

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

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.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 97-24.

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Date of creation: 1997
Date of revision:
Handle: RePEc:zbw:zewdip:9724
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  1. Deaton, Angus, 1990. "Price elasticities from survey data : Extensions and Indonesian results," Journal of Econometrics, Elsevier, vol. 44(3), pages 281-309, June.
  2. 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.
  3. Deaton, Angus, 1988. "Quality, Quantity, and Spatial Variation of Price," American Economic Review, American Economic Association, vol. 78(3), pages 418-30, June.
  4. M. Ayadi & Jaya Krishnakumar & M.S. Matoussi, 1997. "Combining Spatial and Temporal Variations in Unit Values in the Estimation of Price elasticities and Application to Tunisian Households," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 97.01, Institut d'Economie et Econométrie, Université de Genève.
  5. Preston, Ian & Laisney, François & Crawford, Ian A., 1997. "Estimation of Household Demand Systems Using Unit Value Data," ZEW Discussion Papers 97-06, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  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 579-90, May.
  7. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119, July.
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