Estimation of Own- and Cross-Price Elasticities Using Unit Values: Econometric Issues and Evidence from Urban Ethiopia

Posted: 29 Feb 2008

See all articles by Abbi M. Kedir

Abbi M. Kedir

University of Leicester - Department of Economics

Abstract

In Sub-Saharan Africa, estimation of price elasticities using budget surveys is almost non-existent. In this study, own- and cross- price elasticities have been estimated from spatial variation in prices for six food groups using the 1994 Ethiopian Urban Household Survey. Following earlier work, we relate budget shares and unit values (i.e., the ratio of total household expenditure to quantity purchased) to the logarithms of prices, incomes and other relevant household characteristics. As expected, the food commodity groups have inelastic demand but only one third of the commodity groups have statistically significant own-price elasticities. We found also the presence of complementarity and substitution between the commodities but statistically significant results were obtained only for a very few number of the food items. To test the validity of within-cluster methodology used in earlier work, our estimates have also been compared with estimates obtained using actual/market prices. Our results compare well with findings elsewhere.

Suggested Citation

Kedir, Abbi M., Estimation of Own- and Cross-Price Elasticities Using Unit Values: Econometric Issues and Evidence from Urban Ethiopia. Journal of African Economies, Vol. 14, No. 1, pp. 1-20, 2005. Available at SSRN: https://ssrn.com/abstract=915451

Abbi M. Kedir (Contact Author)

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

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