Supply and Demand Elasticities Toolbox
The Supply and Demand Elasticities Toolbox provides a technical guide, Stata code, and data files to estimate supply and demand elasticities. The first portion of the guide is dedicated to the estimation of elasticities in producer theory and portion two is dedicated to elasticities in consumer theory. This toolbox is restricted to AGRODEP members and AGRODEP affiliate members only.
The Toolbox corresponds with the documentation provided in AGRODEP Technical Note 10 and is prepared by Fabio Gaetano Santeramo.
AGRODEP Technical Note 10 Abstract:
This AGRODEP Technical Note provides a literature review on the topic of estimation of demand and supply elasticities. To this end, it starts the discussion by summarizing the main facets of production theory and consumer theory to introduce the concept of elasticities, with examples of different types of elasticities most utilized in the literature. Next, it discusses the identification problem in estimating elasticities, i.e. the issue of having to solve for unique values of the parameters of the structural model from the values of the parameters of the reduced form of the model. It summarizes various methodologies employed in the literature to solve this problem and gives practical examples. These solutions include, but are not limited to, using instrumental variables, adopting a recursive structure, holding demand constant, and imposing inequality constraints in order to restrict the domain of estimates.