SENSITIVITY OF PRICE ELASTICITY ESTIMATES TO ALTERNATIVE PARAMETRIZATION OF LINEAR EXPENDITURE SYSTEM

Abstract

In Pakistan linear expenditure system has been estimated in a few studies using household survey data which contains no information on prices (See, for example, Ahmad, Ludlow and Stern (1988) and Ali (1985». With the assumption that prices 1 remaln constant across households in the survey, the linearity of the expenditure system is specified only with respect to in - come (or total expenditure). This amounts to estimating composite parameters which are combin ations of parameters of the utility function and prices.