Demand system estimation in the absence of price data: an application of Stone-Lewbel price indices

César E. Castellón, Tullaya Boonsaeng, Carlos E. Carpio

Research output: Contribution to journalArticle

6 Scopus citations

Abstract

This article evaluates the feasibility of estimating a system of demand equations in the absence of price information using the approach developed by Lewbel (1989). Stone-Lewbel (SL) price indices for commodity groups are constructed using information on the budget shares and the Consumer Price Indices (CPIs) of the goods comprising the commodity groups, which allows for household-level prices to be recovered. This study evaluates how susceptible are elasticities and marginal effects estimates from traditional parametric demand systems to the CPI used in the construction of the SL prices. To do this, three alternative regional CPIs are considered for the construction of the SL prices: monthly, quarterly and a constant (unity) price index. Elasticities and marginal effect estimates are computed for eight food commodity groups using the Exact Affine Stone Index (EASI) model as the parametric demand system and data from the United States Consumer Expenditure Survey. The estimates proved to be robust to the alternative regional CPIs considered in the construction of SL price indices, even to the absence of one. Hence, the results suggest that it is possible to accurately estimate a demand system even in the absence of price information.

Original languageEnglish
Pages (from-to)553-568
Number of pages16
JournalApplied Economics
Volume47
Issue number6
DOIs
StatePublished - Feb 1 2015

Keywords

  • Consumer Expenditure Survey
  • Consumer Price Index
  • Exact Affine Stone Index demand model
  • food demand

Fingerprint Dive into the research topics of 'Demand system estimation in the absence of price data: an application of Stone-Lewbel price indices'. Together they form a unique fingerprint.

  • Cite this