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Total expenditure endogeneity in a system of demand for public consumption expenditures in the UK

Total expenditure endogeneity in a system of demand for public consumption expenditures in the UK
Total expenditure endogeneity in a system of demand for public consumption expenditures in the UK
Contrary to standard empirical studies of demand for public consumption expenditure a system of demand equations is examined where the total expenditure variable is considered endogenous in the sense that it is correlated with the equation errors. Using a recently available UK dataset we explore alternative specifications of an auxiliary equation for total expenditure, which depend on prices and other instrumental variables, and apply a Hausman-type and a likelihood ratio test of exogeneity. The results reject exogeneity and suggest that when endogeneity of total expenditure is taken into account the constraints of homogeneity and symmetry cannot be rejected.
demand systems, public expenditure, endogeneity
0264-9993
279-291
Pitarakis, Jean-Yves
ee5519ae-9c0f-4d79-8a3a-c25db105bd51
Tridimas, George
d0bae498-e46d-49f2-a896-be8410840e44
Pitarakis, Jean-Yves
ee5519ae-9c0f-4d79-8a3a-c25db105bd51
Tridimas, George
d0bae498-e46d-49f2-a896-be8410840e44

Pitarakis, Jean-Yves and Tridimas, George (1999) Total expenditure endogeneity in a system of demand for public consumption expenditures in the UK. Economic Modelling, 16 (2), 279-291. (doi:10.1016/S0264-9993(98)00043-1).

Record type: Article

Abstract

Contrary to standard empirical studies of demand for public consumption expenditure a system of demand equations is examined where the total expenditure variable is considered endogenous in the sense that it is correlated with the equation errors. Using a recently available UK dataset we explore alternative specifications of an auxiliary equation for total expenditure, which depend on prices and other instrumental variables, and apply a Hausman-type and a likelihood ratio test of exogeneity. The results reject exogeneity and suggest that when endogeneity of total expenditure is taken into account the constraints of homogeneity and symmetry cannot be rejected.

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More information

Published date: 1 April 1999
Keywords: demand systems, public expenditure, endogeneity

Identifiers

Local EPrints ID: 173937
URI: http://eprints.soton.ac.uk/id/eprint/173937
ISSN: 0264-9993
PURE UUID: 817da5a8-ecad-439e-b3cb-4b0b0a975408
ORCID for Jean-Yves Pitarakis: ORCID iD orcid.org/0000-0002-6305-7421

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Date deposited: 09 Feb 2011 09:56
Last modified: 14 Mar 2024 02:48

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Author: George Tridimas

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