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When does specification or aggregation across consumers matter for economic impact analysis models? An investigation into demand systems

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  • Ole Boysen

    (University College Dublin)

Abstract

Economic impact analysis simulation models frequently rely on some kind of representation of consumption behavior. However, the sensitivity of such results with respect to the choices of the specification and the level of aggregation across consumers has not yet been thoroughly examined. We exploit a unique dataset to simulate various stereotypical scenarios and investigate the influence of the choice between six demand system specifications and household-level versus national-level models on several outcome measures. We find that both choices have a large influence on simulation results and thus on policies deduced therefrom. Our results point to pragmatic recommendations for various settings.

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  • Ole Boysen, 2019. "When does specification or aggregation across consumers matter for economic impact analysis models? An investigation into demand systems," Empirical Economics, Springer, vol. 56(1), pages 137-172, January.
    • Handle: RePEc:spr:empeco:v:56:y:2019:i:1:d:10.1007_s00181-017-1353-z
    DOI: 10.1007/s00181-017-1353-z
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    More about this item

    Keywords

    Demand systems; Aggregation; Specification; Calibration; Economic impact analysis models;
    All these keywords.

    JEL classification:

    • C69 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Other
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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