Evaluating the performance of laids using different price indices and micro data

Abstract

The main objective of this paper is to evaluate the performance of the linear AIDS using different price indices and micro-data. The comparison is undertaken in terms of expenditure and price elasticities and the two-stage Heckman model is employed for the estimation of the relevant elasticities. All elasticities are adjusted to account the changes of the inverse Mills ratio. Comparing the overall performance of different linear AIDS approximations with the non-linear AIDS is seems that the one relying on corrected Stone price index performs better than the other approximations at least for the particular data set concerning Greek household food consumption.

JEL Classification: C34, C43, D12