Robust estimation of models of Engel curves

Both standard and robust methods are used here to estimate models of Engel curves for three household commodities, namely, food, transport, and tobacco and alcohol in Canada. The income elasticities of demand computed from the various methods differ significantly for the transport and tobacco-alcohol consumption where there are obvious outliers and zero expenditures problem. Robust estimators point to lower income elasticities and have better performance than the standard LS and Tobit estimator. These results are analyzed in the light of the information on finite-sample performance obtained in a previous Monte Carlo study. Copyright Springer-Verlag Berlin Heidelberg 2003