ESTIMATING A SYSTEM OF DEMAND EQUATIONS FOR LOW-INCOME HOUSEHOLDS FROM A BIASED SURVEY OF EXPENDITURES
A few consistent demand systems for household expenditures have been around for many years. In this study we tested an alternative system that also satisfies the restrictions that theory places on such systems. The test shows how a survey of expenditures, with biased and missing reporting, can be tr...
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Veröffentlicht in: | Studia Universitatis Babeș-Bolyai. Oeconomica 2011-12, Vol.56 (3), p.3-29 |
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Sprache: | eng |
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Zusammenfassung: | A few consistent demand systems for household expenditures have been
around for many years. In this study we tested an alternative system that also
satisfies the restrictions that theory places on such systems. The test shows how a
survey of expenditures, with biased and missing reporting, can be treated as long as
a subsample is reasonably accurate with respect to reporting of expenditures, and
the reporting of income is reasonably accurate for the whole sample. Estimation of a
model on this subsample enables us to devise a consistent model that allows the
initially biased reporting to be corrected and also furnishes corrected expenditure
shares and demand elasticities. Demand elasticities can give us important insights
into expenditure patterns and how these are affected by price and income changes.
The spending patterns of households are rooted in the fundamental forces of the
socio-economic circumstances of societies. Policies targeted at specific socioeconomic
groups can therefore be made more efficient through knowledge about the
target groups’ specific expenditure patterns and demand elasticities. The averages of
such measures for the population at large are of limited use in this respect. Estimates
from a specific area can be used to simulate how subsistence quantities, own price
elasticities and income elasticities may vary from household to household within
specific income groups. Knowledge of how demand elasticities and spending
patterns change with household income may thus facilitate policy efforts of
government to serve the needs of those communities better. The estimated demand
elasticities discussed in this paper show some interesting patterns when income
increases or the prices of broad expenditure groups change. |
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ISSN: | 2065-9644 1220-0506 2065-9644 |