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Engel elasticities, pseudo-maximum likelihood estimation and bootstrapped standard errors. A case study

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Abstract

Estimation of standard errors of Engel elasticities within the framework of a linear structural model formulated on two-wave panel data is considered. The complete demand system is characterized by measurement errors in total expenditure and by latent preference variation. The estimation of the parameters as well as the standard errors of the estimates is based on the assumption that the variables are normally distributed. Considering a concrete case it is demonstrated that normality does not hold as a maintained assumption. In the light of this standard errors are estimated by means of bootstrapping. However, one obtains rather similar estimates of the standard errors of the Engel elasticities no matter whether one sticks to classical normal inference or perform non-parametric bootstrapping.

Suggested Citation

  • Terje Skjerpen, 2008. "Engel elasticities, pseudo-maximum likelihood estimation and bootstrapped standard errors. A case study," Discussion Papers 532, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:532
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    File URL: https://www.ssb.no/a/publikasjoner/pdf/DP/dp532.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Engel elasticities; standard errors; classical normal theory; bootstrapping;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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