Please use this identifier to cite or link to this item:
Blundell, Richard W.
Horowitz, Joel
Parey, Matthias
Year of Publication: 
Series/Report no.: 
cemmap working paper No. CWP67/18
Berkson errors are commonplace in empirical microeconomics and occur whenever we observe an average in a specified group rather than the true individual value. In consumer demand this form of measurement error is present because the price an individual pays is often measured by the average price paid by individuals in a specified group (e.g., a county). We show the importance of such measurement errors for the estimation of demand in a setting with nonseparable unobserved heterogeneity. We develop a consistent estimator using external information on the true distribution of prices. Examining the demand for gasoline in the U.S., accounting for Berkson errors is found to be quantitatively important for estimating price effects and for welfare calculations. Imposing the Slutsky shape constraint greatly reduces the sensitivity to Berkson errors.
consumer demand
nonseparable models
quantile regression
measurement error
gasoline demand
Berkson errors
Document Type: 
Working Paper

Files in This Item:
429.82 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.