On endogeneity of consumer expenditures in the estimation of households demand system

Anastasiia Timofeeva ()
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Anastasiia Timofeeva: Novosibirsk State Technical University, Novosibirsk, Russia

Applied Econometrics, 2015, vol. 37, issue 1, 87-106

Abstract: The paper analyzes one case of the endogeneity problem, namely, the presence of measurement error in consumer expenditures by estimation of the demand system according to the household sample surveys. Based on factor analysis a novel approach is proposed and tested. It allows weakening the bias of demand elasticity estimates and does not require additional information (instrumental variables, repeated observations). Its advantage is the possibility of estimating the parameters of the true consumer expenditures distribution which give an idea of the distortion degree of information on the population expenditures.

Keywords: endogenous regressor; measurement error; consumer expenditures; income elasticity of demand; factor analysis; method of instrumental variables. (search for similar items in EconPapers)
JEL-codes: C21 C51 D12 D31 (search for similar items in EconPapers)
Date: 2015
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