Demand Systems Estimation with Microdata: A Censored Regression Approach.

Demand systems estimation increasingly makes use of household-level microdata, mainly to measure the effects of demographic variables. Data based on these household-expenditure surveys present a major estimation problem. For any given houshold, many of the goods have zero consumption, implying a censored dependent variable. Techniques which do not take this censored dependent variable into account will yield biased results. We utilize a censored regression approach that is computationally simple, consistent, and asymptotically efficient. The results are then presented and compared with those obtained using an uncensored technique.