Quality, Heterogeneous Goods, and Cross-Section Demand

In recent years, attention has focused on cross-section and panel data sets that have become available to researchers for applied demand analysis. Such data sets present unique challenges to analysts as discussed in this chapter. This chapter addresses the issue of the specification of commodity demand when estimated with cross-sectional and/or panel data where the role of quality through price changes becomes an issue. The chapter also discusses how to model systems of heterogeneous demand functions, including linear utility and hedonic distance function models. Finally, panel data models for food demand systems are discussed with how to model demographic variables and higher order Engel curves. Issues of zero values and censoring, as well as missing prices, are also addressed with a focus on empirical implementation with systems of demand functions. The advantages of an alternative approach to panel data based on pseudo-panel data are discussed.

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