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Demographics in demand systems

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  • Laura Blow

    (Institute for Fiscal Studies and University of Surrey)

Abstract

Household composition can be expected to affect the allocation of household expenditure among goods, at the very least because of economies of scale as household size increases and because different people have different needs (adults versus children, for example). Specifying demographic effects correctly in demand analysis is important both in order to estimate correct price and expenditure elasticities and for the purpose of making household welfare comparisons. A common way of including demographics is as a function that scales total expenditure, and to make this scaling function indepen- dent of the level of total expenditure. A popular method in the parametric estimation of demand systems is to estimate share equations that are quadratic in the logarithm of total expenditure, but there is also a substantial literature on the semi-parametric estimation of Engel curves. We employ some of these semi-parametric techniques to show that, for some goods, further terms are likely to be required in the Engel curve addition to quadratic terms. We use this to identify the parameters of a scaling function that varies with total expenditure. Keywords: Demand analysis, demographics, base independence, semi-parametric.

Suggested Citation

  • Laura Blow, 2003. "Demographics in demand systems," IFS Working Papers W03/18, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:ifsewp:03/18
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    File URL: http://www.ifs.org.uk/wps/wp0318.pdf
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    References listed on IDEAS

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    2. Alizadeh, Parisa & Mohammadi, Hosein & Shahnoushi, Naser & Saghaian, Sayed, 2024. "Effects of Socio-Economic and Demographic Factors on Meat Consumption Pattern in Iran: A Demand System Approach," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 16(3), September.
    3. Molnár, György & Cseres-Gergely, Zsombor, 2008. "Háztartási fogyasztói magatartás és jólét Magyarországon a rendszerváltás után [Household consumer behaviour and welfare in Hungary since the change of system]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 107-135.
    4. Kamil Dybczak & Peter Tóth & David Voòka, 2014. "Effects of Price Shocks on Consumer Demand: Estimating the QUAIDS Demand System on Czech Household Budget Survey Data," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 64(6), pages 476-500, December.

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    More about this item

    Keywords

    Demand analysis; demographics; base independence; semi-parametric;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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