 Quality, quantity, and spatial variation of price: Back to the bogJohn Gibson and Bonggeun Kim Journal of Development Economics, 2019, vol. 137, issue C, 66-77 Abstract: Estimating potential effects of price reforms is a key issue for many developing countries. Demand studies increasingly use household survey data on budget shares, which vary with quantity, price, and quality. If quality response to price is ignored, estimated price elasticities of quantity demand conflate responses on quantity and quality margins. Our review finds over 80% of published studies using budget shares from household survey data have this error. We use survey data from Vietnam, with prices and qualities observed over space, to directly estimate the price elasticity of quality. This is much larger than what is derived from the income elasticity of quality, based on the Deaton (1988) separability restrictions. Across the 45 items we study, the own-price elasticity of quantity demand is overstated by a factor of four, on average, if the response of quality to price is ignored. Keywords: Demand; Household surveys; Quality; Price reform; Unit values; Separability (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:137:y:2019:i:c:p:66-77 DOI: 10.1016/j.jdeveco.2018.11.008 Access Statistics for this article Journal of Development Economics is currently edited by M. R. Rosenzweig More articles in Journal of Development Economics from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.