Nonlinear Budget Set Regressions for the Random Utility Model

Sören Blomquist, Anil Kumar, Che-Yuan Liang and Whitney Newey

No 31194, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper is about the nonparametric regression of a choice variable on a nonlinear budget set under utility maximization with general heterogeneity, i.e. in the random utility model (RUM). We show that utility maximization and convex budget sets make this regression three dimensional with a more parsimonious specification than previously derived. We show that nonconvexities in the budget set will have little effect on these results in important cases. We characterize all the restrictions of utility maximization on the budget set regression and show how to check these restrictions in applications. We formulate budget set effects that can be identified by this regression and give automatic debiased machine learners of these effects. We consider use of control functions to allow for endogeneity. Throughout we take as the main example the effect of taxes on taxable income including accounting for productivity growth. In an application to Swedish data we find the taxable income elasticity of a change in the slope of each segment to be .52, that the regression satisfies the restrictions of utility maximization at the values chosen for over 95% of observations, and that a productivity growth rate we estimate is close to other estimates.

JEL-codes: C14 C24 H31 J22 (search for similar items in EconPapers)
Date: 2023-04
New Economics Papers: this item is included in nep-des, nep-lma, nep-pbe and nep-upt
Note: LS PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.nber.org/papers/w31194.pdf (application/pdf)

Related works:
Working Paper: Nonlinear Budget Set Regressions for the Random Utility Model (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:31194

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w31194

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().