Confidence Intervals for Estimates of Elasticities

J. N. Lye J. G. Hirschberg and Daniel Slottje
Authors registered in the RePEc Author Service: Jeanette Ngaire Lye and Joseph Gerald Hirschberg

No 1053, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: Elasticities are often estimated from the results of demand analysis however, drawing inferences from them may involve assumptions that could influence the outcome. In this paper we investigate one of the most common forms of elasticity which is defined as a ratio of estimated relationships and demonstrate how the Fieller method for the construction of confidence intervals can be used to draw inferences. We estimate the elasticities of expenditure from Engel curves using a variety of estimation models. Parametric Engel curves are modelled using OLS, MM robust regression, and Tobit. Semiparametric Engel curves are estimated using a penalized spline regression. We demonstrate the construction of confidence intervals of the expenditure elasticities for a series of expenditure levels as well as the estimated cumulative density function for the elasticity evaluated for a particular household.

Keywords: Engel curves; Fieller method; Tobit; robust regression; semiparametric (search for similar items in EconPapers)
JEL-codes: C12 C13 C14 C24 D12 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2008
New Economics Papers: this item is included in nep-ecm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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