Estimation of Quadratic Engel Curve in the presence of Measurement Error and Endogeneity of Total Expenditure using Pakistani Data
Author: Ghulam Abbas

This study examines the suitable shape for food Engel curve for Pakistan using latest data of Household Income and Expenditure Survey (HIES) for the year 2010-11. We employed three estimation methods namely instrumental variable (IV), Lewbel (1996) and Control Function approach. Our results suggests that all the estimation methods employed in this study confirm that quadratic logarithmic Engel curve fits Pakistani data very well. Using this suitable quadratic shape we estimate the food Engel curve correcting measurement error and problem of endogeneity of total expenditure and found that the latter is more serious problem than the former one. The expenditure elasticity of food demand is also examined and obtain that each estimation method provide the elasticity between zero and one which indicate that food is a necessary good for Pakistani households. Furthermore in this study we investigate the relationship between food budget share and household size. We found that there is positive and statistically significant relationship between food budget share and household size. Supervisor:- Dr. Zahid Asghar

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Keywords : Estimation of Quadratic, Measurement Error, Quadratic Engel Curve, Total Expenditure
Supervisor: Zahid Asghar

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