Hi Statalisters,
I have a somewhat domain-specific question about the demandsys command in Stata 18, and would be grateful for any help or guidance.
demandsys allows you to enter demographic variables in demand system estimation via the demographics option. As per the manual, the command supports two ways of doing this: the demographic translation method of Pollak and Wales (1978) and the demographic scaling method of Ray (1983) and Poi (2002).
One nice feature of the demographic scaling approach is that, as in the original Ray paper, the rho parameters can be interpreted as equivalence scales: if you include a variable for number of children in a household, an estimated rho of 0.5 can be interpreted as saying that the "cost" of a child is about 50% that of an adult. What I am wondering is: if I instead specify that demographic translation should be used, does anyone know of a transformation of the estimated rho parameters (or of some other postestimation approach) that could be used to obtain equivalence scales from these estimates?
Thanks for any help!
References:
Ranjan Ray, "Measuring the costs of children: An alternative approach", Journal of Public Economics, vol. 22, no.1, 1983, pp. 89-102, https://doi.org/10.1016/0047-2727(83)90058-0.
Robert A. Pollak and Terence J. Wales, “Estimation of Complete Demand Systems from Household Budget Data: The Linear and Quadratic Expenditure Systems”, The American Economic Review, vol. 68, no. 3, 1978, pp. 348–59, http://www.jstor.org/stable/1805266.
I have a somewhat domain-specific question about the demandsys command in Stata 18, and would be grateful for any help or guidance.
demandsys allows you to enter demographic variables in demand system estimation via the demographics option. As per the manual, the command supports two ways of doing this: the demographic translation method of Pollak and Wales (1978) and the demographic scaling method of Ray (1983) and Poi (2002).
One nice feature of the demographic scaling approach is that, as in the original Ray paper, the rho parameters can be interpreted as equivalence scales: if you include a variable for number of children in a household, an estimated rho of 0.5 can be interpreted as saying that the "cost" of a child is about 50% that of an adult. What I am wondering is: if I instead specify that demographic translation should be used, does anyone know of a transformation of the estimated rho parameters (or of some other postestimation approach) that could be used to obtain equivalence scales from these estimates?
Thanks for any help!
References:
Ranjan Ray, "Measuring the costs of children: An alternative approach", Journal of Public Economics, vol. 22, no.1, 1983, pp. 89-102, https://doi.org/10.1016/0047-2727(83)90058-0.
Robert A. Pollak and Terence J. Wales, “Estimation of Complete Demand Systems from Household Budget Data: The Linear and Quadratic Expenditure Systems”, The American Economic Review, vol. 68, no. 3, 1978, pp. 348–59, http://www.jstor.org/stable/1805266.
