TY - JOUR

T1 - Demand system estimation in the absence of price data

T2 - an application of Stone-Lewbel price indices

AU - Castellón, César E.

AU - Boonsaeng, Tullaya

AU - Carpio, Carlos E.

PY - 2015/2/1

Y1 - 2015/2/1

N2 - 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.

AB - 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.

KW - Consumer Expenditure Survey

KW - Consumer Price Index

KW - Exact Affine Stone Index demand model

KW - food demand

UR - http://www.scopus.com/inward/record.url?scp=84914692068&partnerID=8YFLogxK

U2 - 10.1080/00036846.2014.975332

DO - 10.1080/00036846.2014.975332

M3 - Article

AN - SCOPUS:84914692068

VL - 47

SP - 553

EP - 568

JO - Applied Economics

JF - Applied Economics

SN - 0003-6846

IS - 6

ER -