A study of petrol consumption using Spanish panel data

Methods are proposed for the estimation of equations for consumption categories subject to non-participation and other types of censoring using an unbalanced panel data set on petrol expenditures from the Spanish Continuous Family Expenditure Survey. The use of panel data allows one to deal with two issues that pose econometric problems when dealing with individual budget data. On one hand, unobserved time invariant heterogeneity is controlled for. On the other hand, the problem of censoring in the dependent variable is addressed and the measurement error induced by infrequent purchases is corrected. Results suggest the use of probabilities of purchase estimated from the temporal pattern of expenditure records in order to carry out this correction. The estimated demand system is subsequently used to simulate the effects of changes in the taxation of petrol.