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Statistical estimation of utility functions

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Summary

The paper begins with a discussion of the possibility of estimating the parameters of a utility function from the estimated values of the parameters of the demand functions derived from them. The cases of the Klein-Rubin and Quadratic utility functions are analysed in detail.

Next, from the assumptions of utility optimization, a method is derived for estimating the parameters of linear and logarithmic utility functions. This method is based on Principal Component Analysis. The method is applied to a sample of 9 countries in all levels of development. It is verified that the results obtained agree with accepted notions about the rankings of goods and services according to preferences.

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Additional information

Hector Correa is responsible for the theoretical argument and the specification of the statistical technique used. S. B. Kim is responsible for the collection of data and the computations.

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Correa, H., Kim, S.B. Statistical estimation of utility functions. De Economist 122, 399–409 (1974). https://doi.org/10.1007/BF01680064

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Keywords

  • Principal Component Analysis
  • Utility Function
  • International Economic
  • Public Finance
  • Statistical Estimation