centre for microdata methods and practice

ESRC centre

cemmap is an ESRC research centre

ESRC

Keep in touch

Subscribe to cemmap news

Nonparametric estimation of a nonseparable demand function under the Slutsky inequality restriction

Authors: Richard Blundell , Joel L. Horowitz and Matthias Parey
Date: 02 May 2017
Type: Journal Article, Review of Economics and Statistics, Vol. 99, Issue 2, pp. 291-304
DOI: 10.1162/REST_a_00636

Abstract

We derive conditions under which a demand function with nonseparable unobserved heterogeneity in tastes can be estimated consistently by nonparametric quantile regression subject to the shape restriction from the Slutsky inequality. We consider nonparametric estimation of the nonseparable demand for gasoline in the U.S. The estimated function detects differences in behavior between heavy and moderate gasoline users, and reveals systematic variation in the responsiveness of demand to plausible changes in prices across the income distribution. We test for exogeneity of prices and develop a new method for estimating quantile instrumental variables to allow for endogeneity of prices. The empirical results illustrate the improvements in finite-sample performance of a nonparametric estimator from imposing shape restrictions based on economic theory.

This article is forthcoming.

Download full version

Publications feeds

Subscribe to cemmap working papers via RSS

Search cemmap

Search by title, topic or name.

Contact cemmap

Centre for Microdata Methods and Practice

How to find us

Tel: +44 (0)20 7291 4800

E-mail us