Modelling zeroes in microdata
Authors: Fry, Jane M.; Fry, Tim R. L.; McLaren, Keith R.; Smith, Tanya N.
Source: Applied Economics, Volume 33, Number 3, 1 February 2001 , pp. 383-392(10)
Abstract:Although the literature contains a number of suggestions for dealing with problems caused by a preponderance of zero expenditure observations that frequently occur in micro level budget studies, in general, these suggestions seem to be either empirically intractable or theoretically unappealing. In this paper it is argued that a natural theoretical specification can be motivated by duality theory and that the statistical technique of compositional data analysis provides a corresponding complementary stochastic specification. The resulting model is a consistent theoretical and stochastic specification for handling the possibility of a zero demand over a range of expenditures and/or prices. The model is then applied to the 1988/89 Australian Household Expenditure Survey.
Document Type: Research Article
Publication date: February 1, 2001