Abstract
Does it make any difference to econometric results whether ones uses the Laspeyres or Paasche index? In general, the divergence between these two is small, suggesting that index choice makes little difference to econometric results. We estimate 72 Malthusian models and because the Paasche and Laspeyres indices we use show below average divergence, these reslts should be conservative. We find that parameters differ substantially, that parameter signs can be reversed, thatr 2s change markedly and that hypothesis test results are reversed. These findings indicate the importance of estimating exact indices.
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Gandar, J., Loschky, D. The impact of the Paasche-Laspeyres choice upon econometric results. Empirical Economics 20, 265–269 (1995). https://doi.org/10.1007/BF01205438
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DOI: https://doi.org/10.1007/BF01205438