ESTIMATION AND TESTING AN ADDITIVE PARTIALLY LINEAR MODEL IN A SYSTEM OF ENGEL CURVES

Abstract

The form of the Engel curve has long been a subject of discussion in appliedeconometrics and until now there has no been definitive conclusion about its form. In this paperan additive partially linear model is used to estimate semiparametrically the effect of totalexpenditure in the context of the Engel curves. Additionally, we consider the non-parametricinclusion of some regressors which traditionally have a non linear effect such as age andschooling. To that end we compare an additive partially linear model with the fullynonparametric one using recent popular test statistics. We also provide the p-values computedby bootstrap and subsampling schemes for the proposed test statistics. Empirical analysis basedon data drawn from the Spanish Expenditure Survey 1990-91 shows that modelling the effectsof expenditure, age and schooling on budget share deserves a treatment better than that adoptedin simple semiparametric analysis.Engel curve, expenditure, nonparametric estimation, marginal integration