Neglected dynamics in panel data models; consequences and detection in finite samples*

The bias of various estimators for static cross-section and panel data models is assessed in a simulation study, where the actual data generating process is a dynamic adjustment mechanism with random individual effects. It is concluded that the consequences of incorrectly estimating a static model can be rather serious. Therefore, it is important to have an accurate technique available for the detection of dynamics. Two exact similar tests for the presence of a lagged dependent variable in panel data models are developed; in some simulation experiments these tests outperform standard asymptotic test procedures. Empirical results on Engle curves for food illustrate the above issues.     

Economies of scale and gender discrimination in transition: the case of the Republic of Tajikistan

This article tests for economies of scale and for evidence of discrimination based on gender lines in intra-household consumption allocations using data from the Living Standards Survey in the Republic of Tajikistan (TLSS). Overall results support the existence of household economies of scale in Tajikistan; however, empirical evidence supporting boy–girl discrimination is limited despite anecdotal evidence otherwise.     

Demand for Environmental Quality: An Empirical Analysis of Consumer Behavior in Sweden

In this paper we estimate the income elasticity of demand for recreational services and other traditional groups of goods in Sweden and test for potential changes in such estimates over the twentieth century. Due to the difficulty of directly observing the demand for recreational services, we employ an indirect methodology by using the demand for some outdoor goods as a proxy for the demand for recreational services. In line with most prior research, our results confirm the expectation that recreational services, as a public good, is a luxury good in Sweden. Our results also show that the income elasticities for traditional goods are stable over time, indicating that consumer preferences for expenditure on these specific commodities do not change over time.      

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     

Heterogeneity in Consumer Demands and the Income Effect: Evidence from Panel Data

This paper uses unique Spanish panel data on household expenditures to test whether unobservable heterogeneity in household demands (taste, etc.) is correlated with total expenditures (income). The main finding is that tastes are indeed correlated with income for about half of the goods considered, implying that cross‐sectional estimates of income elasticities for these goods are biased. The goods are the following: food eaten outside home, alcohol and tobacco, transportation, and energy. The elasticity of alcohol and tobacco is more than halved when taking unobserved heterogeneity into account. For transportation, the bias is sufficiently large to misclassify the good as a luxury.     

Engel curves and the unitary theory of the household

Previously unutilized household budget data are used to fit Engel curves to test Gary Becker's unitary theory of the household. If resources are fungible and are allocated to maximize a household utility function, the pattern of outlay should be invariant to control over and sources of income. The earnings of wives and Engel curves for food, rent, clothing, light and fuel, insurance and sundries are estimated using the two‐step method of Murphy and Topel. Although working wives contributed an average of 20% of household income, the coefficient of their earnings is not significant in every Engel curve estimated. It appears that Becker's altruist head of the household is the housewife/financial manager, at least in New York City in the early twentieth century.     

A Behavior‐Based Approach to the Estimation of Poverty in India

Estimates of poverty in India are crucial inputs for the understanding of world poverty, yet there is much disagreement about the numbers and the legitimacy of methods used to derive them. In this paper, we propose and justify an alternative approach to identify the poor, which uses the proportion of income spent on food. Our estimates have weaker data requirements than official methods, and they compare favorably with several validation tests. Most notably, households around our state poverty lines obtain their calories from similar sources, whereas this is not true of official poverty lines. We also find that rates of self‐reported hunger are higher in states that we classify as poor.     

Migrants’ international transfers and educational expenditure

The primary objective of this article is to cast some light upon the relationship between education expenditure and the volume of remittances sent to Albania from abroad by international migrants. To assess the existence of an education enhancing effect of remittances, an Engel curve framework is used. In addition, quintile regression analysis is employed to investigate whether migrants’ remittances have a differentiated effect on various quantiles of the conditional distribution of education consumption. The two main empirical findings are that household income has a positive and well‐determined impact on education expenditure, whereas international transfers do not influence education spending.