Estimating Divisia index for expenditure variables

asked 2014-04-23 02:36:20 +0000

Sirak
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updated 2014-04-23 10:59:38 +0000

SHAZAMHelp
417 ●12 ●16 ●27 http://econometrics.com/

Hi All, I want to aggregate expenditure variables using a Divisia index (aggregate of labour, deprecation and other costs). I saw some examples in the manual where the commands require price and quantity information like: Index p1 q1 p2 q2 to estimate price index or index q1 p1 q2 p2 to estimate quantity index

In my case I have cross-sectional data and the variables are expenses (there is no quantity in it) with some observation have a value of zero expenses. how can I estimate the Divisia index? As I said, there are some observations which have zero value for some of the expenses. How do these zero values affect the estimation of the Divisia index? Thanks for the help. Sirak

answered 2014-04-23 12:48:23 +0000

SHAZAMHelp
417 ●12 ●16 ●27 http://econometrics.com/

Division by zero will cause estimation to fail. Typically you might exclude the observations, substitute with a very small number or perhaps interpolate (while qualifying your results).

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Thanks ShazamHelp. What about the way of estimating DAVISIA index for expenditures? could you please advise on how to aggregate expenditure variables by estimating Davisia index? Thanks once again. Sirak

Sirak ( 2014-04-24 05:41:17 +0000 )edit

Thanks a lot. What about the estimation procedure? As I have said I have cross-sectional data and the variables are expenses, would you please advise on the methodological aspect. Thanks in Advance. Sirak

Sirak ( 2014-04-24 06:27:23 +0000 )edit

Expenditure data is naturally a product of price and quantity so to work with the Price Index methods you would need to decompose expenditure by dividing expenditure by price to get quantity. But if you only have one series on expenditure then probably you can't do much with it.

SHAZAMHelp ( 2014-04-25 15:21:34 +0000 )edit

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