We propose a consumer demand system approach to estimating the size of the black economy where alternative hypotheses affecting the empirical results can be tested in a nested framework. This approach allows for the estimation of the under‐reporting of household income from various sources, dispensing with the need to use arbitrary criteria to classify households by their main source of income. It also avoids potential bias in black economy estimates arising from mistaking preference heterogeneity (substitution) as income effects. We illustrate these arguments by estimating the extent to which self‐employment income in the UK is under‐reported using parametric and nonparametric techniques.
This paper investigates the production of misleading results from hedonic analysis when heterogeneity in the effects of quality characteristics is ignored. Two causes of such heterogeneity are examined: (a) when quality is registered in different ways in the brochures of different tour operators and (b) when the effects of quality characteristics differ between packages with a different star rating. Furthermore, the authors test the impact of the presence of these two sources of heterogeneity on the estimated effects of quality characteristics on price, along with a third possible source of heterogeneity – the rating system of the hotels. They then discuss the policy implications of their empirical findings.
This paper considers a model of household demand for water in a theoretical framework consistent with funtamendal principles of comsumer behaviour. It applies this model to individual household data to estimate the price and income elasticities of residential demand for water in Cyprus and evaluate the welfare effects associated with changes in the water pricing system. We &nd that the current regionally heterogeneous increasing block pricing system in the island introduces gross price distortions that are not justi&ed either on efficiency or equity grounds. A shift towards uniform marginal cost pricing will eliminate the deadweight loss of the current system. However, its bene&ts will be distributed in favour of the better off households. Overall, price can be an effective tool for residential water demand management, however, it may also lead to socially undesirable distributional effects on households.
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