Estimating Household Welfare from Disaggregate Expenditures

• Agricultural Economics Workshop

Date and Location

Thursday, September 27, 2018, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

Existing models of life-cycle demand typically assume that expenditure shares for particular goods within a period are fixed, but this is at sharply at odds with strong empirical evidence, including Engel's Law. We show how one can use data on disaggregate expenditures to estimate demand systems that are flexible and may feature highly non-linear Engel curves; this same procedure yields an index of household welfare closely related to the marginal utility of expenditures within a period. We use these methods with repeated cross-sectional expenditure surveys from Uganda to estimate an incomplete demand system and household welfare in different periods.