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Re: st: QUAIDS

From   Michael Musyoka <>
To   "" <>
Subject   Re: st: QUAIDS
Date   Tue, 29 Jan 2013 03:02:51 -0800 (PST)

I think you should check on whether it is ONLY the left hand side (dependent variables) which are the shares are multiplied with the CDF variable. I need to be corrected if my presumption that only the right hand side variables are multiplied by CDF is wrong.
Again, Brian, while I had you had exchanged some emails on nlsur QAIDs previously on the issue of zero budget shares, I had to do the zero budget shares correction manually as you suggest below. The results seem plausible though I did not drop one equation. 


From: Brian P. Poi <>
Sent: Monday, January 28, 2013 5:25 PM
Subject: Re: st: QUAIDS

On 01/27/2013 05:48 AM, nigussie Tefera wrote:
> Dear Murat and Kolawole,
> Thanks a lot for your the help!
> As both of you rightly said, I am planning to multiply the CFD variables by all variables and it is only PDF variables that is going to be additional variables in the estimation techniques. The "nlsurquaidsNNP" program that I tried to write did exactly in the same way. The CDF is multiplied with the all variables and the PDF is the additional variables to the system. In my first post, I didn't spell it out properly, I am sorry for that. In fact, Shonkwiler and Yen (1999) warned that the share of expenditure will not be added up to one, as you also mentioned, and they suggest running full set of equations rather than for N-1 equations. However, Yen, Lin, and Smallwood (2003) as cited in Zheng and Henneberry (2010) suggested to recalculate share of one of the food items under study in such a way that the adding property to be hold. i.e. if  Si=wi+πPDFi . where si is the new budget share and wi the original budget share and PDF is the probability density
>   function derived from the first-stage multivariate probit function. Then they indicated the Sn=1- . I want to apply the same approach and exclude one of the food items in estimating the demand equations so as to control for singularity. And also as both of you mentioned correcting for the standard error is one of the difficulties in using this approaches. I think there are research works on progress to correct for it. In estimating the elasticities, again, we need to take into accounts the CDF and PDF variables and hence the standard formula for elasticity estimate doesn’t apply once the system is controlled for CDF and PDF variables.
> I prefer to use the recently released Boi’s quaids stata program to estimate the system (may be with modification) but I am not yet sure whether the program is already controlled for observed zero consumption expenditure as suggested by Shonkwiler and Yen(1999). Dear Dr. Poi, I need your suggestion in this regard.
> Best
> Nigussie


Right now the -quaids- program recently published in the Stata Journal
(Poi, 2012) does not do anything with respect to the
zero-expenditure-share issue.

Moreover, -quaids- handles demographic variables using an extension of the
method introduced in Ray (1983).  My very strong suspicion is that
specifying a CDF, PDF, or inverse Mills ratio in the demographics() option
of -quaids- as if such a variable were just another demographic like the
number of children or the number of adults in a household is _not_ the
right thing to do.

I often get asked about Stata code for demand system estimation with
zero-expenditure shares.  I have nothing to show for that as of now.  As
you know, there have been many different methods proposed in the
literature.  I have never actually implemented any of them myself.

     -- Brian Poi

Poi, B. P. (2012). Easy demand-system estimation with quaids. Stata
Journal, 12, 433--446.

Ray, R. (1983). Measuring the costs of children: an alternative approach.
Journal of Public Economics, 22, 89--102.

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