Imputing rent in consumption measures,with an application to consumption poverty in Canada, 1997–2009

We consider two econometric problems in the measurement of poverty, both relating to rent imputation. First, we account for quality differences correlated with selection into owner‐occupied versus rental tenure. This correction increases estimated household consumption by 5% over uncorrected estimates and decreases estimated poverty rates quite dramatically. Second, we propose that measurement error induced by the imputation be corrected by imputing a consumption distribution, rather than a consumption level, for each household. This correction increases estimated poverty rates slightly. We use our methods to measure consumption poverty in Canada, and find that the imputation strategy used influences the patterns observed. For example, measured poverty among the elderly barely declines when one uses our methods, in contrast to the almost 6 percentage point reduction we find using traditional methods. In our assessment of the over‐time evolution of consumption poverty, we find that substantial progress has been made on overall poverty and on child poverty, but that poverty among the elderly hardly changed.     

Estimation of Equivalence Scales Under Convertible Rationing

This paper provides estimates of equivalence scales based on three Quadratic Almost Ideal type models of the food share with coupon resale, and on their extended versions. A chief feature of the models is the method of dealing with infrequency of zero expenditure on coupon goods through imputation. The models are applied to an Iranian wartime budget survey. The results indicate little scope for measurement error. However, they also reveal a strong cross‐section price effect, which proves robust to a variety of checks. The effect of price heterogeneity proves critical in identification of the scale estimates, providing relatively rare empirical evidence consistent with the Base Independence (BI) hypothesis. The BI food share estimates of cost of children have plausible values.     

MEASURING WEALTH WITH SURVEY DATA: AN EVALUATION OF THE 1983 SURVEY OF CONSUMER FINANCES

Because wealth estimates from survey data have usually fallen substantially short of independent aggregate estimates, survey data have not been seen as adequate for assessing questions dependent on a good representation of the entire distribution of wealth, such as estimates of wealth concentration. The 1983 Survey of Consumer Finances (SCF), which contains a supplementary sample of very high income households drawn from a tax-file sample frame, is the first U.S. survey since the 1963 Survey of Financial Characteristics of Consumers that offers hope of accurately measuring the entire wealth distribution. In this paper, we discuss the design of the survey, the critical issue of proper weighting to merge the supplementary sample with an area probability sample, and the role of imputation. We show that the use of ordinary area probability samples alone leads to probable bias in the measurement of highly concentrated assets such as stocks and bonds. We compare the SCF data with aggregates derived from the flow-of-funds accounts of the Federal Reserve Board. While methodological issues cloud exact comparisons, it appears overall that the SCF estimates are at least as credible as other aggregate measurements. Finally, we use the data to assess the change in concentration of wealth from 1963 to 1983. We estimate that the concentration of wealth in terms of households did not change significantly over this period.     

The effect of death tax on the labour supply of donors: evidence from TRA97

Exploiting estate tax cuts from the Taxpayer Relief Act of 1997 (TRA97), this paper estimates the effect of death tax on the labour supply of living potential donors. To this end, difference-in-difference with multiple imputation approach is applied to micro-level panel data. This paper finds that the estate tax cuts makes no difference in labour force participation or working hours of potential donors in a statistically meaningful way, although the TRA97 reduces marginal estate tax rates by 37.51% on average. This finding suggests that the death tax causes no meaningful distortion of living potential-donors’ labour supplies at either extensive or intensive margin.     

Depreciation Provisions and Investment Incentives under Full Imputation

This paper examines how the Australian full imputation and capital gains tax provisions can combine to influence incentives to invest by affecting the cost of capital. Costs of capital for both unincorporated enterprises and widely held, Australian-owned companies are examined under idealized depreciation provisions. The paper also presents numerical estimates of costs of capital under actual Australian depreciation provisions.     

Accounting for Environmental Services: Contrasting the SEEA and the ENRAP Approaches

Both the System of Integrated Environment and Economic Accounting (SEEA) and the Environmental and Natural Resources Accounting Project (ENRAP) are efforts to expand conventional national economic accounts in order to better reflect interactions between the market economy and the natural environment. In order to maintain a close relationship to the System of National Accounts (SNA) accounting standards, SEEA adopts conventional definitions of productive sectors. However, SEEA fails to account for many valuable services of the natural environment and encourages the use of techniques that provide misleading and poor estimates of depreciation and damage to the environment. ENRAP addresses these deficiencies by explicitly recognizing that the natural environment is a productive economic sector. ENRAP encourages the use of imputation approaches that draw on techniques common in the environmental economics literature. These approaches are consistent with definitions of depreciation and environmental damage widely accepted in economic theory. The principles that underlie the ENRAP approach provide a basis for contrasting ENRAP and SEEA empirically. Using Philippine data, SEEA-type estimates are compared with those of ENRAP.     

Demand system estimation in the absence of price data: an application of Stone-Lewbel price indices

This article evaluates the feasibility of estimating a system of demand equations in the absence of price information using the approach developed by Lewbel (1989). Stone-Lewbel (SL) price indices for commodity groups are constructed using information on the budget shares and the Consumer Price Indices (CPIs) of the goods comprising the commodity groups, which allows for household-level prices to be recovered. This study evaluates how susceptible are elasticities and marginal effects estimates from traditional parametric demand systems to the CPI used in the construction of the SL prices. To do this, three alternative regional CPIs are considered for the construction of the SL prices: monthly, quarterly and a constant (unity) price index. Elasticities and marginal effect estimates are computed for eight food commodity groups using the Exact Affine Stone Index (EASI) model as the parametric demand system and data from the United States Consumer Expenditure Survey. The estimates proved to be robust to the alternative regional CPIs considered in the construction of SL price indices, even to the absence of one. Hence, the results suggest that it is possible to accurately estimate a demand system even in the absence of price information.     

Stability by deterrence in cooperative non-sidepayment n-person games

This paper reports several experimental tests of the deterrence set, a solution concept for n-person games proposed by Laffond and Moulin (1977, 1981). This solution concept is distinctive because it specifies equilibria attained through the use of threats, where threats are conceptualized as costly not only to the target but also to the user. The laboratory tests were conducted in the context of 3- and 4-person cooperative non-sidepayment matrix games. In the first experimental test, the deterrence set was juxtaposed against the imputation set. Results indicate that the deterrence set has greater predictive accuracy than the imputation set. In a series of further tests, the deterrence set was juxtaposed against both the imputation set and the von Neumann-Morgenstern stable set solution. Results again show that the deterrence set is more accurate than the imputation set, but neither the deterrence set nor the stable set is reliably more accurate than the other. Overall, these results indicate that deterrence is a viable basis for stability in cooperative non-sidepayment games.     

MEASURING INEQUALITIES: DO HOUSEHOLD SURVEYS PAINT A REALISTIC PICTURE?

The paper addresses the issue of the accuracy of standard‐of‐living measurements using household survey data. First, it highlights the fact that lighter data collection processes in some developing countries have added to measurement errors in consumption and income aggregates measurement errors. The paper reasserts the need to apply reference guidelines to the measurement of household consumption in order to compute comparable distribution indicators across countries and over time. Second, it contends that it is hard to analyze inequality solely from consumption patterns without taking income and savings into account. Two solutions are proposed for the correction of income measurement errors: by using savings declarations and by implementing a multiple imputation procedure. The results are based on a careful analysis of the EPM93 survey of Madagascar whose design is quite close to the LSMS household surveys, and the ENV98 survey of Côte d'Ivoire representative of surveys conducted nowadays in most Sub‐Saharan African countries.     

Estimation of an implied price elasticity of demand through current pricing practices

Researchers have long pursued better methods to estimate price elasticity of market-level demand. Due to a plethora of empirical problems, the estimates produced in many empirical studies leave researchers with wide confidence intervals that do little to clarify demand conditions. As a result, these estimates are of limited practical use to the firm facing a firm-level demand. Here, a non-statistical methodology based on seller optimization behaviour is applied that creates an ‘implied elasticity’ of firm-level demand that is robust, intuitively plausible and free of oppressive data requirements. These elasticities are tested in an applied setting against pricing managers’ surveyed estimates for customer price sensitivity for freight rail transportation services and it is found that the estimate is consistent with their pricing behaviour. This methodology is recommended for creating a simple, plausible starting point estimate for firm-level price elasticities, or using this calculation as an input to statistical studies.     

Stock Returns and Volatility: an empirical study of Chinese stock markets

This paper uses GARCH models to analyse the relationship between returns and volatility on the Shanghai and Shenzhen Stock Exchanges in China. Empirical estimates using the sample data from 21 May 1992 to 2 February 1996 suggest that the variances of the returns in the two markets are best modeled by the GARCH-M (1,1) specification. Volatility transmission between the two markets (the volatility spill-over effect) is also found to exist. The results of one month ahead ex ante forecasts show that the conditional variances of the returns of the two stock markets exhibit a similar pattern.     

Money Demand in an EU Accession Country: A VECM Study of Croatia

The paper estimates the money demand in Croatia using monthly data from 1994 to 2002. A failure of the Fisher equation is found, and adjustment to the standard money‐demand function is made to include the inflation rate as well as the nominal interest rate. In a two‐equation cointegrated system, a stable money demand shows rapid convergence back to equilibrium after shocks. This function performs better than an alternative using the exchange rate instead of the inflation rate as in the ‘pass‐through’ literature on exchange rates. The results provide a basis for inflation rate forecasting and suggest the ability to use inflation targeting goals in transition countries during the EU accession process. Finding a stable money demand also limits the scope for central bank ‘inflation bias’.     

WEALTH DISTRIBUTION AND INVESTMENT INCOME IN BRITAIN*

This paper examines two different approaches to the estimation of the size distribution of wealth. The first section describes new estimates for the distribution in Britain in 1968 using the estate method and discusses the sensitivity of the results to the main assumptions. The second section presents preliminary estimates using the investment data, a method which has not been widely used. In the final section the results obtained for the upper tail of the distribution from the two methods are compared.     

Consumption smoothing in Russia1

Using a panel from the Russian Longitudinal Monitoring Survey (1994–2004), this paper investigates to what extent Russian households have been able to maintain their living standards while suffering income shocks. Consumption smoothing is modelled by means of an equilibrium correction mechanism, which disentangles short‐run dynamics and long‐run equilibrium adjustments. GMM estimation is used to control for individual household effects in the presence of dynamics. Additionally, we differentiate between food and non‐food consumption, positive and negative shocks, rural and urban areas, and several levels of poverty risk. We find that dynamics are important in the consumption equation, and that estimates are sensitive to imputation errors in home food production. No strong claims can be made regarding heterogeneity in smoothing behaviour.     

Food consumption in urban China: an empirical analysis

This paper examines consumption patterns of urban households in China using aggregated household consumption data. A demand system comprising six commodities (rice,pork,vegetables,fish,eggs and fruits) is estimated using a two-stage budgeting procedure which incorporates an almost ideal deamnd system (AIDS) in each stage, Elasticity estimates from the system are plausible and consistent with other relevant studies. Results from this study strengthen the evidence of the emergence of a large Chinese market for non-stable food. The study provides rationale and basis for additional research into Chinese food consumption, especially processed food.     

The (un)reliability of real-time output gap estimates with revised data

This paper investigates the differences between real-time and ex-post output gap estimates using a newly-constructed international real-time dataset over the period from 1973:Q1 to 2012:Q3. We extend the findings in Orphanides and van Norden (2002) for the United States that the use of ex-post information in calculating potential output, not the data revisions themselves, is the major cause of the difference between real-time and ex-post output gap estimates to nine additional OECD countries. The results are robust to the use of linear, quadratic, Hodrick–Prescott, Baxter–King, and Christiano–Fitzgerald detrending methods. By using quasi real-time methods, reliable real-time output gap estimates can be constructed with revised data.     

Advertising,learning, and consumer choice in experience good markets: an empirical examination*

This article empirically analyzes different effects of advertising in a nondurable, experience good market. A dynamic learning model of consumer behavior is presented in which I allow both “informative” effects of advertising and “prestige” or “image” effects of advertising. This learning model is estimated using consumer level panel data tracking grocery purchases and advertising exposures over time. Empirical results suggest that in this market, advertising's primary effect was that of informing consumers. The estimates are used to quantify the value of this information to consumers and evaluate the welfare implications of an alternative advertising regulatory regime.     

Shang inquiry as an alternative to Delphi: Some experimental findings

A new group judgment method known as Shang is presented as an alternative to Delphi. Shang is structured to avoid Delphi problems associated with convergence pressures and response commitment while incorporating Delphi advantages. The new method is evaluated through an experiment comparing it with a control method and two Delphi techniques, one using point estimates and one using distributional estimates. Findings indicate that Shang is generally superior to Delphi in producing accurate numerical estimates from the judgments of a group of experts.     

The effects of monetary policy in the Czech Republic: an empirical study

In this paper, we examine the effects of Czech monetary policy on the economy within the vector auto regression (VAR), structural VAR, Bayesian VAR with sign restrictions, and factor-augmented VAR, frameworks. We document a well-functioning transmission mechanism similar to the euro area countries, especially in terms of persistence of monetary policy shocks. Subject to various sensitivity tests, we find that a contractionary monetary policy shock has a negative effect on the degree of economic activity and the price level, both with a peak response after one year or so. Regarding prices at the sectoral level, tradables adjust faster than non-tradables, which is in line with microeconomic evidence on price stickiness. There is no price puzzle, as our data come from a single monetary policy regime. There is a rationale in using the real-time output gap instead of current GDP growth, as using the former results in much more precise estimates. The results indicate a rather persistent appreciation of the domestic currency after a monetary tightening, with a gradual depreciation afterwards.     

Imputation of Missing Values in the Fundamental Data: Using MICE Framework

Revolutionary developments in the field of big data analytics and machine learning algorithms have transformed the business strategies of industries such as banking, financial services, asset management, and e-commerce. The most common problems these firms face while utilizing data is the presence of missing values in the dataset. The objective of this study is to impute fundamental data that is missing in financial statements. The study uses ‘Multiple Imputation by Chained Equations’ (MICE) framework by utilizing the interdependency among the variables that wholly comply with accounting rules. The proposed framework has two stages. The initial imputation is based on predictive mean matching in the first stage and resolving financial constraints in the second stage. The MICE framework allows us to incorporate accounting constraints in the imputation process. The performance tests conducted on the imputed dataset indicate that the imputed values for the 177 line items are good and in line with the expectations of subject matter experts.