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Nonparametric Estimation of a Nonseparable Demand Function under the Slutsky Inequality Restriction

Blundell, R; Horowitz, J; Parey, M; (2017) Nonparametric Estimation of a Nonseparable Demand Function under the Slutsky Inequality Restriction. The Review of Economics and Statistics , 99 (2) pp. 291-304. 10.1162/REST_a_00636. Green open access

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Abstract

We present a method for consistent nonparametric estimation of a demand function with nonseparable unobserved taste heterogeneity subject to the shape restriction implied by the Slutsky inequality. We use the method to estimate gasoline demand in the United States. The results reveal differences in behavior between heavy and moderate gasoline users. They also reveal variation in the responsiveness of demand to plausible changes in prices across the income distribution. We extend our estimation method to permit 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.

Type: Article
Title: Nonparametric Estimation of a Nonseparable Demand Function under the Slutsky Inequality Restriction
Open access status: An open access version is available from UCL Discovery
DOI: 10.1162/REST_a_00636
Publisher version: http://dx.doi.org/10.1162/REST_a_00636
Language: English
Additional information: This version is the version of record. For information on re-use, please refer to the publisher’s terms and conditions.
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1558042
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