Quadratic Engel Curves and Consumer Demand

Banks, James; Blundell, Richard; Lewbel, Arthur

doi:10.1162/003465397557015

“…Now we turn to the extended model (1). The support assumption needs to be modified in an obvious way.…”

Section: Identification Of F B Under Full Supportmentioning

confidence: 99%

“…This step has the beneficial side effect that it removes general inflation as well. A popular extension in this model allows for quadratic terms in total expenditure (QUAIDS, Banks, Blundell and Lewbel (1997)). However, we focus on the budget share for food at home (BSF), which, due at least in parts to satiation effects, is often documented to decline steadily across the total expenditure range.…”

Section: Motivation: Consumer Demandmentioning

confidence: 99%

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The triangular model with random coefficients

Hoderlein

¹

,

Holzmann

²

,

Meister

³

2017

Journal of Econometrics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The triangular model is a very popular way to capture endogeneity. In this model, an outcome is determined by an endogenous regressor, which in turn is caused by an instrument in a first stage. In this paper, we study the triangular model with random coefficients and exogenous regressors in both equations. We establish a profound non-identification result: the joint distribution of the random coefficients is not identified, implying that counterfactual outcomes are also not identified in general. This result continues to hold, if we confine ourselves to the joint distribution of coefficients in the outcome equation or any marginal, except the one on the endogenous regressor. Identification continues to fail, even if we focus on means of random coefficients (implying that IV is generally biased), or let the instrument enter the first stage in a monotonic fashion. Based on this insight, we derive bounds on the joint distribution of random parameters, and suggest an additional restriction that allows to point identify the distribution of random coefficients in the outcome equation. We extend this framework to cover the case where the regressors and instruments have limited support, and analyze semi-and nonparametric sample counterpart estimators in finite and large samples. Finally, we give an application of the framework to consumer demand. Terms of use: Documents in

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“…It is applied here in an extended version, which allows for more flexible Engel curves, i.e. the quadratic almost ideal demand system (QUAIDS), where budget shares are modeled in a quadratic function of the log-budget (see Banks, Blundell, and Lewbel, 1997). Let Q i,j denote the demand of household i for good j in levels and s i,j = Q i,j /y i the respective demand share from the budget.…”

Section: A Demand System For Consumption and Savingsmentioning

confidence: 99%

“…by the log-linear Laspeyres index (ln(P * ) = js j ln(p j )), resulting in the linearized QUAIDS. This functional form implies an income elasticity for demand levels which is non-constant in the budget (see Banks et al, 1997). Omitting household indices for simplicity, the income elasticity corresponds to:…”

Section: A Demand System For Consumption and Savingsmentioning

confidence: 99%

Household Savings Decision and Income Uncertainty

Beznoska

¹

,

Ochmann

²

2010

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper empirically investigates the effects of changes in the interest rate as well as transitory income uncertainty on households' consumption-savings decision. Applying a structural demand model to German survey data, we estimate the uncompensated interest rate elasticity for savings, in line with the literature, to around zero. Accordingly, any policy-induced variation of net returns to savings is expected to have no significant effects on the level of savings. Moreover, we find significant effects of precautionary savings on the consumption-savings decision. As a result of a doubling of transitory income uncertainty, an average household increases savings by 4.4%. These effects vary by household composition and social status. Terms of use: Documents in

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