Estimation of household demand systems using unit value data

Many budget surveys present the interesting features that for a wide range of goods they contain quantity information along with expenditure information, and that the geographical location of households is fairly precise. We take advantage of these features to develop a method for estimation of price reactions using unit value data which exploits the implicit links between quantity and unit value choices. This allows us to combine appealing Engel curve specifications with a model of quality choice in a way which is consistent with demand theory. The method is applied to Czech data.