ANALYSIS OF FLEXIBLE ENGEL FUNCTIONS

Quantifying the relationship between expenditure for a commodity and household income (Engel analysis) has focused on the use of classical functional forms with few rigorous procedures available for selecting the most appropriate function We employ flexible functional forms {Box-Cox curves} to distinguish statistically among classical curves These flexible forms are a natural extension of the class of mathematical models useful for Engel analyses We compare the Box-Cox curves and the traditional functions using the criteria of flexibility, predictive performance, and elasticity behavior The flexible forms are preferred for all but one of the commodities considered