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Compositional data analysis and zeros in micro data

Author

Listed:
  • Jane Fry
  • Tim Fry
  • Keith McLaren

Abstract

The application of compositional data analysis methods in economics has some attraction. The methodology relies upon the use of 'log-ratios' in the statistical analysis. Such an approach is not possible when the data to be analysed include observations where the observed budget share is zero. We, therefore, consider and extend the methods of compositional data analysis in the situation where the data to be analysed include observations where the observed budget share is zero. The modified compositional data methods are discussed both in statistical terms and through potential economic interpretations of the method. Further, the modified methodology is applied to the 1988-89 Australian Household Expenditure Survey yielding estimates for a system of Engel curves.

Suggested Citation

  • Jane Fry & Tim Fry & Keith McLaren, 2000. "Compositional data analysis and zeros in micro data," Applied Economics, Taylor & Francis Journals, vol. 32(8), pages 953-959.
    • Handle: RePEc:taf:applec:v:32:y:2000:i:8:p:953-959
    DOI: 10.1080/000368400322002
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    References listed on IDEAS

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    1. Maureen T. Rimmer & Alan A. Powell, 1994. "Engel Flexibility in Household Budget Studies: Non-parametric Evidence versus Standard Functional Forms," Centre of Policy Studies/IMPACT Centre Working Papers op-79, Victoria University, Centre of Policy Studies/IMPACT Centre.
    2. McLaren, Keith R & Fry, Jane M & Fry, Tim R L, 1995. "A Simple Nested Test of the Almost Ideal Demand System," Empirical Economics, Springer, vol. 20(1), pages 149-161.
    3. Fry, Jane M. & Fry, Tim R. L. & McLaren, Keith R., 1996. "The stochastic specification of demand share equations: Restricting budget shares to the unit simplex," Journal of Econometrics, Elsevier, vol. 73(2), pages 377-385, August.
    4. Russel J. Cooper & Keith R. McLaren, 1992. "An Empirically Oriented Demand System with Improved Regularity Properties," Canadian Journal of Economics, Canadian Economics Association, vol. 25(3), pages 652-668, August.
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    More about this item

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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