SFB 303 Discussion Paper No. A-436

Author: Heid, Frank
Title: Testing Increasing Spread when there are errors in the data
Abstract: The concept of increasing spread was used in Hildenbrand (1993) in order to test the Law of Demand. It was shown that the average income effect of households' demand is positive. In this paper we analyze the results given there under the assumption that the data contains reporting errors of the interviewed households. In particular, we give a sensitivity analysis of income and expenditure errors. It turns out that the bias of an assumed income error is less crucial than its variance. Much more robust are the estimations to assumed errors in the expenditure data.
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Creation-Date: Juni 1994
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