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Semi-nonparametric IV estimation of shape-invariant Engel curves

Blundell, R.; Chen, X.; Kristensen, D.; (2007) Semi-nonparametric IV estimation of shape-invariant Engel curves. Econometrica , 75 (6) pp. 1613-1669. 10.1111/j.1468-0262.2007.00808.x. Green open access

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Abstract

This paper studies a shape-invariant Engel curve system with endogenous total expenditure, in which the shape-invariant specification involves a common shift parameter for each demographic group in a pooled system of nonparametric Engel curves. We focus on the identification and estimation of both the nonparametric shapes of the Engel curves and the parametric specification of the demographic scaling parameters. The identification condition relates to the bounded completeness and the estimation procedure applies the sieve minimum distance estimation of conditional moment restrictions, allowing for endogeneity. We establish a new root mean squared convergence rate for the nonparametric instrumental variable regression when the endogenous regressor could have unbounded support. Root-n asymptotic normality and semiparametric efficiency of the parametric components are also given under a set of "low-level" sufficient conditions. Our empirical application using the U.K. Family Expenditure Survey shows the importance of adjusting for endogeneity in terms of both the nonparametric curvatures and the demographic parameters of systems of Engel curves.

Type: Article
Title: Semi-nonparametric IV estimation of shape-invariant Engel curves
Open access status: An open access version is available from UCL Discovery
DOI: 10.1111/j.1468-0262.2007.00808.x
Publisher version: http://dx.doi.org/10.1111/j.1468-0262.2007.00808.x
Language: English
Additional information: The copyright to this article is held by the Econometric Society, http://www.econometricsociety.org. It may be downloaded, printed and reproduced only for personal or classroom use. Absolutely no downloading or copying may be done for, or on behalf of, any for-profit commercial firm or other commercial purpose without the explicit permission of the Econometric Society. For this purpose, contact Claire Sashi, General Manager, at sashi@econometricsociety.org.
Keywords: C51, D12
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/15870
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