Abstract
Nonparametric techniques are used to estimate income densities, Engel functions and their derivatives, and income elasticities. Nonparametric kernel methods give less ambiguous estimates of the densities than discrete, maximum penalised likelihood estimation.
The nonparametric estimates of the Engel functions, their derivatives, and the income elasticities are compared with some corresponding parametric estimates. The nonparametrically estimated Engel functions provide a better fit to the data. Also, the nonparametric elasticity estimates are qualitatively similar to the parametric estimates. Some statistically significant differences are observed between the parametric versus nonparametric estimates, but not to the extent of having any major policy implications.
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This analysis is based on the Statistics Canada 1978 and 1986 Surveys of Family Expenditures Public Use Microdata Files, which contain anonymised data collected in the 1978 and 1986 Canadian Family Expenditure Surveys. All computations in this paper on these microdata were prepared by the author. Responsibility for this use and interpretation of these data is entirely that of the author. An earlier and significantly different version of this paper, entitled Nonparametric Estimation of Income Densities and Elasticities, appeared as Department of Economics Working Paper Number 27 (October, 1989), University of Regina.
This research was supported in part by grants from the Social Sciences and Humanities Research Council of Canada, and the University of Regina President's Research Fund. I am grateful to Simon Power for helpful discussions, Paul Rilstone, an anonymous referee and the Editor for comments on earlier versions of the paper. I also thank participants in seminars at the University of Alberta, the University of British Columbia, the University of Regina and the 1990 Meetings of the Canadian Economics Association, Victoria, BC for their comments. Brian Southam and Jason Walters provided invaluable research assistance. Any remaining errors are my responsibility.
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Nicol, C.J. An empirical comparison of nonparametric and parametric Engel functions. Empirical Economics 18, 233–249 (1993). https://doi.org/10.1007/BF01205400
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DOI: https://doi.org/10.1007/BF01205400