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Estimating Engel curves: a new way to improve the SILC-HBS matching process using GLM methods

Author

Listed:
  • Julio López-Laborda
  • Carmen Marín-González
  • Jorge Onrubia-Fernández

Abstract

Microdata are required to evaluate the distributive impact of the taxation system as a whole (direct and indirect taxes) on individuals or households. However, in European Union countries this information is usually distributed into two separate surveys: the Household Budget Surveys (HBS), including total household expenditure and its composition, and EU Statistics on Income and Living Conditions (EU-SILC), including detailed information about households' income and direct (but not indirect) taxes paid. We present a parametric statistical matching procedure to merge both surveys. For the first stage of matching, we propose estimating total household expenditure in HBS (Engel curves) using a GLM estimator, instead of the traditionally used OLS method. It is a better alternative, insofar as it can deal with the heteroskedasticity problem of the OLS estimates, while making it unnecessary to retransform the regressors estimated in logarithms. To evaluate these advantages of the GLM estimator, we conducted a computational Monte Carlo simulation. In addition, when an error term is added to the deterministic imputation of expenditure in the EU-SILC, we propose replacing the usual Normal distribution of the error with a Chi-square type, which allows a better approximation to the original expenditures variance in the HBS. An empirical analysis is provided using Spanish surveys for years 2012–2016. In addition, we extend the empirical analysis to the rest of the European Union countries, using the surveys provided by Eurostat (EU-SILC, 2011; HBS, 2010).

Suggested Citation

  • Julio López-Laborda & Carmen Marín-González & Jorge Onrubia-Fernández, 2021. "Estimating Engel curves: a new way to improve the SILC-HBS matching process using GLM methods," Journal of Applied Statistics, Taylor & Francis Journals, vol. 48(16), pages 3233-3250, December.
  • Handle: RePEc:taf:japsta:v:48:y:2021:i:16:p:3233-3250
    DOI: 10.1080/02664763.2020.1796933
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    Cited by:

    1. Julio López Laborda & Carmen Marín González & Jorge Onrubia, 2024. "Observatorio sobre el reparto de los impuestos y las prestaciones entre los hogares españoles. Octavo informe – 2021," Studies on the Spanish Economy eee2024-04, FEDEA.
    2. Julio López-Laborda & Carmen Marín-González & Jorge Onrubia, 2024. "Redistribution in Spain through taxes (direct and indirect) and benefits (cash and in-kind): methodology and main results for 2021," Working Papers 2024-02, FEDEA.

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