Share Equations versus Double Logarithmic Functions in the Estimation of Income, Own- and Cross-Price Elasticities

Abstract

In this paper, we compare the results obtained by using double logarithmic demand functions with the one obtained by using functions that relate budget shares to the logarithms of prices and incomes in order to estimate income elasticities and own- and cross-price elasticities for a number of categories of goods. The share equation functional form allows us to model households which do not purchase all goods and estimate unconditional demands that are of interest for policy purposes. We report income elasticities and own- and cross-price elasticities for eight goods for 1993. We compare these estimates with those obtained by using the double logarithmic demand specification.Own- and Cross-Price Elasticities, Income Elasticities, Unit Values, Quality Effects, Transition