A two-stage pooled panel data estimator of demand elasticities

Arbeitspapier

In a seminal paper, Feenstra (1994) developed an instrumental variable estimator which is becoming increasingly popular for estimating demand elasticities. Soderbery (2015) extended this estimator and created a routine which was shown to be more robust to data outliers when the number of time periods is small or moderate. In this paper, we extend the Feenstra/Soderbery (F/S) estimator along two important dimensions to obtain a more efficient estimator: we handle the cases where there are no simultaneity problems, i.e. when supply is either elastic or inelastic, and we generalize the current practice of choosing a particular reference variety by creating a pooled estimator across all possible reference varieties. Using a Monte Carlo study, we show that our proposed estimator reduces the RMSE compared to the F/S estimator by between 60 and 90 percent across the whole parameter space.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Papers ; No. 951

Classification and Topics

• Classification: Wirtschaft ; Estimation: General ; Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models ; Multiple or Simultaneous Equation Models: Instrumental Variables (IV) Estimation
• Subject: Demand elasticity ; Panel data ; Two-stage estimator

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Thomas von Brasch ; Raknerud, Arvid
• Event: Veröffentlichung
• (who): Statistics Norway, Research Department
• (where): Oslo
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/249141
• Last update: 10.03.2025, 11:41 AM CET