Modelling zeroes in microdata

Although the literature contains a number of suggestions for dealing with problems caused by a preponderance of zero expenditure observations that frequently occur in micro level budget studies, in general, these suggestions seem to be either empirically intractable or theoretically unappealing. In this paper it is argued that a natural theoretical specification can be motivated by duality theory and that the statistical technique of compositional data analysis provides a corresponding complementary stochastic specification. The resulting model is a consistent theoretical and stochastic specification for handling the possibility of a zero demand over a range of expenditures and/or prices. The model is then applied to the 1988/89 Australian Household Expenditure Survey.     

China's macroeconomic stability – an empirical study based on survey data

A complete financial stability analysis should include investigation on macroeconomic stability since macroeconomic development and potential imbalance can increase the financial instability and trigger a financial crisis. Survey data of rating on China's macroeconomic stability is analyzed by estimating an ordered logit model with random effect. Among the candidate macroeconomic indicators, we found that inflation is the key variable that determines China's macroeconomic stability, followed by the change in budget balance and GDP growth gap.     

Outlay equivalence analysis of child gender bias in household expenditure data

This article reports the results of an empirical analysis of gender‐based discrimination among children based on household consumption data from Uzbekistan. We employ the outlay equivalence methodology to examine whether the entry of a new child leads to different effects in the decrease of adult good consumption for boys and for girls. We use a semi‐parametric estimation method to address the so‐called ‘zero consumption problem’, the statistical problem that arises because some households have zero consumption on a budget line in the period prior to the survey date. The results indicate that alcohol and tobacco reveal the incidence of discrimination against girls, while other groups of adult goods do not.     

The distribution of household consumption-expenditure budget shares

This paper explores the statistical properties of household consumption-expenditure budget share distributions – defined as the share of household total expenditure spent for purchasing a specific category of commodities – for a large sample of Italian households in the period 1989–2004. We find that household budget share distributions are fairly stable over time for each specific category, but profoundly heterogeneous across commodity categories. We then derive a parametric density that is able to satisfactorily characterize (from a univariate perspective) household budget share distributions and: (i) is consistent with the observed statistical properties of the underlying levels of household consumption-expenditure distributions; (ii) can accommodate the observed across-category heterogeneity in household budget-share distributions. Finally, we taxonomize commodity categories according to the estimated parameters of the proposed density. We show that the resulting classification is consistent with the traditional economic scheme that labels commodities as necessary, luxury or inferior.     

Video game demand in Japan: a household data analysis

Various economic studies of the video game industry have focused on intra-industry details. This article complements the approach by highlighting broader budget allocation by households. Using the ‘total households’ data of the Family Income and Expenditure Survey, this article estimates the demand model for video games. Estimation results show the effects of household income and demographic factors and prices of goods on the expenditure share of video games. These results indicate the importance of explicitly considering a households' budget allocation, or at least, including information on households.     

Revenue decentralization,central oversight and the political budget cycle: Evidence from Israel

This paper examines whether revenue decentralization and direct external financial supervision affect the incidence and strength of political budget cycles, using a panel of Israeli municipalities during the period 1999–2009. We find that high dependence on central government transfers – as reflected in a low share of locally raised revenues in the municipality's budget – exacerbates political budget cycles, while tight monitoring – exercised through central government appointment of external accountants to debt accumulating municipalities – eliminates them. We also find that this pattern is predominantly accounted for by development expenditures. These results suggest that political budget cycles can result from fiscal institutions that create soft budget constraints: that is, where incumbents and rational voters can expect that the costs of pre-election expansions will be partly covered later by the central government.     

THE IMPACT OF INTRA HOUSEHOLD BALANCE OF POWER ON EXPENDITURE PATTERN: THE AUSTRALIAN EVIDENCE*

The collective approach to household behaviour models the household utility function as the weighted average of the utilities of the individual members of the household. These weights, which measure the relative bargaining power of males and females within the household, are generally regarded as fixed and exogenous. The paper extends the collective approach and estimates a model where the weights are endogenously determined. The novelty of the analysis lies in the simultaneous equations estimation of the bargaining power and the budget share equation that allow for the endogeneity of the power variable in the examination of its impact on the budget share of the various items. The estimation is conducted using data from the 1998–99 Australian Household Expenditure Survey data set. The relative bargaining power of males and females have statistically significant effects on household expenditure patterns. The analysis reveals some interesting non‐monotonic relationships between relative power and budget shares that vary a great deal between commodities.     

An analysis of housing expenditure using semiparametric cross-section models

In this paper we model expenditure on housing for owners and renters by means of endogenous switching regression models using cross-section data. We explain the share of housing in total expenditure from family characteristics and total expenditure, where the latter is allowed to be endogenous. We apply various existing parametric and semiparametric techniques for cross-section data. Exogeneity of total expenditure is rejected for the parametric models but not for most semiparametric models. The results are compared on the basis of budget elasticities and graphs of the estimated relationship between the budget share spent on housing and the logarithm of total expenditure. First version received: November 1997 / Final version received: January 2000     

The automatic reaction of the Italian government budget to fundamentals: an econometric analysis

The paper offers a new estimate of the sensitivity of Italy's primary budget balance to macroeconomic variables. The analysis has distinguishing features: detailed itemization of public finance aggregates; close attention to the statistical properties of the time series; and joint estimation of elasticities with respect to both real GDP and inflation. First, the economic variables driving the automatic component were chosen. Second, when possible, a macroeconomic base was associated with each public finance item. Third, each tax base was regressed on the driving economic variables. Fourth, each budget item that was supposed to include an automatic component was regressed either on its own base or directly on the economic variables affecting the automatic components. The effects on public budget are simulated to investigate the consequences of a change in nominal and real GDP.     

Pro‐girl Bias in Intra‐household Allocation in the Rural Philippines: Revisiting the “Adult Goods” Approach

This paper detects pro‐girl (age 5–15) bias in intra‐household allocation of consumption budget in the rural Philippines using Deaton's “adult goods” method. Based on additional checks (including those for endogeneity), the results appear to be robust. The paper also finds that a larger share of girls among household members is positively associated with a larger budget share on transportation, suggesting that parents pay more for girls' transportation, possibly because of safety concerns. The results also suggest that, despite some earlier results in the literature, the adult goods method is capable of detecting gender bias, although alcohol and tobacco may not be suitable for detecting gender bias.     

Economic growth,industrialization, and the environment

In this paper, I argue the compositional shift from agricultural to industrial production – industrialization – is a central determinant of changes in environmental quality as economies develop. I develop a simple two-sector model of neoclassical growth and the environment in a small open economy to examine how industrialization affects the environment. The model is estimated using sulfur emissions data for 157 countries over the period 1970–2000. The results show the process of industrialization is a significant determinant of observed changes in emissions: a 1% increase in industry's share of total output is associated with an 11.8% increase in the level of emissions per capita.     

Comparison of SML and GMM estimators for the random coefficient logit model using aggregate data

A simulated maximum likelihood (SML) estimator for the random coefficient logit model using aggregate data is found to be more efficient than the widely used generalized method of moments estimator (GMM) of Berry et?al. (Econometrica 63:841?C890, 1995). In particular, the SML estimator is better than the GMM estimator in recovery of heterogeneity parameters which are often of central interest in marketing research. With the GMM estimator, the analyst must determine what moment conditions to use for parameter identification, especially the heterogeneity parameters. With the SML estimator, the moment conditions are automatically determined as the gradients of the log-likelihood function, and these are the most efficient ones if the model is correctly specified. Another limitation of the GMM estimator is that the product market shares must be strictly positive while the SML estimator can handle zero market share observations. Properties of the SML and GMM estimators are demonstrated in simulated data and in data from the US photographic film market.     

The bias of some estimators for panel data models with measurement errors

The paper deals with the (asymptotic) bias in the estimation of regression slope coefficients from panel data observed with error. Unobserved individual and time specific heterogeneity is also assumed. The estimators considered include: the standard ‘within’ and ‘between’ estimators, and estimators based on differences over time. It is shown that in terms of bias, there may be a trade-off between the effect of heterogeneity and of measurement errors. The paper also shows that in situations where the number of observations of each individual is finite (and in practice often small), changes in the correlograms of the measurement error and of the latent exogenous variable may substantially affect the relative bias of the different estimators of the slope coefficient.     

Children as consumers: investigating child diary expenditure data

Abstract.  We investigate expenditure behaviour of school-aged children using child diary information contained in the British Family Expenditure Survey. The estimates from an Almost Ideal Demand System (AIDS) for child expenditure suggest that drinks, sweets, books, and toys are 'normal' goods for children, but clothes, travel, leisure and vice products are 'luxury' items with income elasticities greater than one. Being a lone-parent child and having a working mother are important factors in determining child expenditure decisions. Importantly, a higher parental budget share on any given commodity is typically associated with an increased child budget share on the same commodity.     

Investment and the soft budget constraint in China

This paper examines the incentive effects of the soft budget constraint on the investment behavior of firms in general and on the investment-cash flow sensitivity in particular. To this end, we develop a simple model of moral hazard that takes the soft budget constraint into account. Within this moral hazard environment, we show that investment is positively related to the amount of internal funds. We further show that the presence of the soft budget constraint deteriorates the moral hazard problem, thereby making the investment level less sensitive to the amount of internal funds. This is the case irrespective of whether the soft budget constraint renders the firm more or less liquidity constrained. To test the model's empirical implications, we employ data of China's listed companies for the period from 1997 to 2003. We use the share of state ownership as a proxy for the severity of the soft budget constraint. We find strong evidence that firms with larger shares of state ownership exhibit lower investment-cash flow sensitivities than firms with smaller shares of state ownership.     

Technical efficiency of Spanish manufacturing firms: a panel data approach

This paper estimates the levels of technical efficiency reached by Spanish manufacturing firms, through an econometric estimation of frontier production functions for fifteen sectors of activity, and also, obtains other relevant technological measurements of these productive processes such as the scale and the technical progress parameters. The methodology used is the panel data methods (Schmidt and Sickles, 1984). The statistical source is provided by the Survey on Business Strategies (Encuesta Sobre Estrategias Empresariales), a panel of data covering 855 Spanish manufacturing firms observed over the period 1990-1994. Our econometric results confirm the great heterogeneity in the firms' efficiency, the predominance of constant returns to scale and the great rate of technological progress.     

Financing a competitive recycling initiative in Switzerland

The purpose of the paper is to enhance the understanding of different pricing systems within the real world of solid waste management: first the effect on recycling behaviour of citizens, and second the effect on the budget goals, and third the operational logic of different economic measures will be analyzed. Hence it helps practitioners understand and cope with the challenge of meeting the zero profit budget goal in public solid waste management while inducing behaviour change in the regional solid waste system. The question “How can robust recycling strategies be financed?” is addressed.The analysis draws on a system dynamics model for solid waste management that is based on a model framework on human behaviour and public policy that embraces an evolutionary feedback perspective. The model structure was deduced from an ex-post analysis of observed phenomena in solid waste management such as recurring budget deficits at the local level in Switzerland. The paper illustrates how the model was used as a policy lab in which various pricing and incentive strategies were tested that allowed addressing “what-if-questions” under controlled conditions. The various policy-experiments illustrated crucial trade offs between zero profit budget goals at the local level and the administration of a successful recycling initiative. Different scenario-experiments show that under worst-case conditions economic instrument are not sufficient in order to yield a robust policy outcome.     

The twilight of the setter? Public school budgets in a time of institutional change

We use a policy change that occurred in Oregon in the late 1980s to re‐visit the budget‐maximizing agenda setter theory of local public expenditure. Prior to 1987, Oregon school districts held operating levy elections with an exogenous, often zero or very low, spending reversion. From 1987 through 1990, districts experienced a “safety net” regime where the reversion was at least the previous year's nominal spending. We find that the “safety net” sharply limited the agenda setter's ability to use the reversion as a threat to obtain voter approval of relatively large expenditures.     

THE STRUCTURE OF HOUSEHOLD SPENDING IN SOUTH AMERICAN CITIES: INDEXES OF DISSIMILARITY AND CAUSES OF INTER-CITY DIFFERENCES

Household budget data collected in 1966–1971 in eleven cities in six South American countries are used to define individual mean budget structures (means of budget shares across households). These structures are then compared by indexes of dissimilarity, calculated for the entire budget and also for major components: food, animal protein foods, nonfood, and housing and clothing. Differences among cities in real income account for much of the difference in the share of the consumer budget devoted to food, which in turn is a principal source of overall budget dissimilarity. Within the food and nonfood budgets separately, income is of somewhat less importance; prices and preferences become more significant. Budget structures tend for this reason to be similar for cities in the same country. The structure of nonfood spending also varies markedly between coastal and interior cities, largely because of differences in housing costs. The available price data account for dissimilarities which depend on the price of a single large category of spending, but they do not help explain structural differences involving many categories: prices seem more important for nonfood than for food expenditures. Regression analysis is used to weigh the importance of each variable contributing to dissimilarity.     

Political budget cycles: Do they differ across countries and why?

This paper uses a large panel data set to examine the relation between elections and fiscal policy. We find evidence of political budget cycles: on average, government fiscal deficit increases by almost 1% of GDP in election years. Moreover, these political budget cycles are significantly larger, and statistically more robust, in developing than in developed countries. We propose a moral hazard model of electoral competition to explain this difference. In the model, the size of the electoral budget cycles depends on politicians' rents of remaining in power and the share of informed voters in the electorate. Using suitable proxies, we show that these institutional features explain a large part of the difference in electoral budget cycles between developed and developing countries.