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Semiparametric estimation of lifetime equivalence scales
Author(s) -
Pendakur Krishna
Publication year - 2005
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.768
Subject(s) - equivalence (formal languages) , economics , econometrics , parametric statistics , semiparametric model , commodity , estimation , engel curve , nonparametric statistics , mathematics , statistics , price index , market economy , management , discrete mathematics
Pashardes (1991) and Banks et al. (1994) use parametric methods to estimate lifetime equivalence scales. Their approaches put parametric restrictions on the differences in within‐period expenditure needs across household types, the intertemporal allocation of expenditure, and the shapes of commodity demand equations. This paper puts parametric structure only on the differences in within‐period expenditure needs across household types. This implies structure on the intertemporal allocation of expenditure, but leaves the shapes of commodity demand equations unrestricted. Semiparametric methods are used to estimate within‐period and lifetime equivalence scales with Canadian expenditure data, and to test the restrictions imposed on within‐period expenditure functions. Estimated lifetime equivalence scales are similar in size to those estimated by Banks et al. (1994) and exhibit equal lifetime costs for first and second children. Copyright © 2005 John Wiley & Sons, Ltd.