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Statistical estimation of utility functions

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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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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).

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