Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/97417 
Year of Publication: 
2013
Series/Report no.: 
cemmap working paper No. CWP54/13
Publisher: 
Centre for Microdata Methods and Practice (cemmap), London
Abstract: 
Economic theory rarely provides a parametric specification for a model, but it often provides shape restrictions. We consider nonparametric estimation of the heterogeneous demand for gasoline in the U.S. subject to the Slutsky inequality restriction of consumer choice theory. We derive conditions under which the demand function can be estimated consistently by nonparametric quantile regression subject to the Slutsky restriction. The estimated function reveals systematic variation in price responsiveness across the income distribution. A new method for estimating quantile instrumental variables models is also developed to allow for the endogeneity of prices. In our application, shape-constrained quantile IV estimates show similar patterns of demand as shape-constrained estimates under exogeneity. The results illustrate the improvements in the finite-sample performance of a nonparametric estimator that can be achieved by imposing shape restrictions based on economic theory.
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size
511.08 kB





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