Synthesizing Econometric Evidence: The Case of Demand Elasticity Estimates

26 Pages Posted: 2 Feb 2015

See all articles by Philip DeCicca

Philip DeCicca

McMaster University - Department of Economics; Ball State--Department of Economics

Donald Kenkel

Cornell University - Department of Policy Analysis & Management (PAM); National Bureau of Economic Research (NBER)

Date Written: January 2015

Abstract

Econometric estimates of the responsiveness of health-related consumer demand to higher prices are often key ingredients for policy analysis. Drawing on several examples, especially that of cigarette demand, we review the potential advantages and challenges of synthesizing econometric evidence on the price-responsiveness of consumer demand. We argue that the overarching goal of research synthesis in this context is to provide policy-relevant evidence for broad brush conclusions and propose three main criteria to select among research synthesis methods. We also contribute a new empirical exercise that puts the results of previous research synthesis to the test. In particular, we ask whether the “best” consensus estimates of the price-elasticity of smoking help predict trends in smoking from 1995 to 2010. The demographics of the smoking population in our baseline year predict a downward trend in smoking even if cigarette prices remained constant. Average cigarette prices, however, more than doubled in real terms by 2010. We find that the observed declines in smoking over this period are considerably smaller than smoking demographics combined with prior consensus elasticity estimates would predict. Our results suggest that these consensus estimates may have systematically overestimated the price responsiveness of cigarette demand.

Suggested Citation

DeCicca, Philip and Kenkel, Donald, Synthesizing Econometric Evidence: The Case of Demand Elasticity Estimates (January 2015). NBER Working Paper No. w20906. Available at SSRN: https://ssrn.com/abstract=2558958

Philip DeCicca (Contact Author)

McMaster University - Department of Economics ( email )

Hamilton, Ontario L8S 4M4
Canada

Ball State--Department of Economics ( email )

United States

Donald Kenkel

Cornell University - Department of Policy Analysis & Management (PAM) ( email )

120 Martha Van Rensselaer Hall
Ithaca, NY 14853
United States
607-255-2594 (Phone)
607-255-4071 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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