Estimating demand elasticities under rationing

Adrian R. Fleissig and Gerald A. Whitney

Applied Economics, 2014, vol. 46, issue 4, 432-440

Abstract: Eliminating rationing in the United Kingdom following the Second World War was a concern for policy-makers because of potentially large fluctuations in post-war prices and the impact on unrationed goods. This study shows that in using virtual prices, elasticities can be estimated from a 'free' demand system consistent with observed consumer choices. Substitution estimates without accounting for rationing are misleading. In contrast, using virtual prices and estimating a 'free' market system yield results similar to those of the pre-war period. Results show that food rationing affected expenditure across unrationed goods. Rationing on other services had little effect on expenditure across unrationed goods.

Date: 2014
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DOI: 10.1080/00036846.2013.849379

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