Price elasticities from survey data: Extensions and Indonesian results

Abstract

This paper extends and improves the author's earlier work on measuring own- and cross-price elasticities from spatial variation in prices using household survey data. Double-logarithmic demand functions are replaced by functions that relate budget shares to the logarithms of prices and incomes, and zero expenditures are treated appropriately. Formulae are developed for estimation and for the calculation of standard errors. Limited Monte Carlo evidence suggests that the asymptotic approximations work well in practice. An eleven–commodity system of food demands is estimated using Indonesian data from 1981.