Demand System Estimation in the Absence of Price Data: an Application of Stone-Lewbel Price Indices

Lewbel (1989) developed an approach for the construction of household level commodity price indices (Stone-Lewbel prices) using only budget shares and CPIs of the goods comprising the commodity groups. In this study, we consider three alternative CPIs for the construction of SL prices and the estimation of a demand system. The three CPIs consider are: monthly, quarterly and unity. Where the unity CPI is used to simulate a scenario where no price index information is available. Elasticities and marginal effect estimates from the demand models proved to be robust to the alternative CPIs considered in this study (even to the absence of one).