Generalized Random Coefficients With Equivalence Scale Applications

Peer reviewed: 
No, item is not peer reviewed.
Scholarly level: 
Faculty/Staff
Date created: 
2012
Keywords: 
Unobserved heterogeneity
Nonseparable errors
Random utility parameters
Random coefficients
Equivalence scales
Consumer surplus
Welfare calculations
Abstract: 

We propose a generalization of random coefficients models, in which the regression model is an unknown function of a vector of regressors, each of which is multiplied by an unobserved error. We also investigate a more restrictive model which is additive (or additive with interactions) in unknown functions of each regressor multiplied by its error. We show nonparametric identification of these models. In addition to providing a natural generalization of random coefficients, we provide economic motivations for the model based on demand system estimation. In these applications, the random coefficients can be interpreted as random utility parameters that take the form of Engel scales or Barten scales, which in the past were estimated as deterministic preference heterogeneity or household technology parameters. We apply these results to consumer surplus and related welfare calculations.

Language: 
English
Document type: 
Report
Rights: 
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