figure 3b: typical joint distribution in micro-data
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Figure 3b: Typical Joint Distribution in Micro-Data
3.5 4 4.5 5 5.5 60
0.1
0.2
0.3
0.4
0.5
0.6
Foo
d S
hare
Log Expenditure
3.5 4 4.5 5 5.5 6 6.50
0.2
0.4
0.6
0.8
1
Log Expenditure
Den
sity
kernel density
normal density
Fig 3a: The Density of Log Consumption: FES
3 3.5 4 4.5 5 5.5 6 6.5
log total expenditure
0.1
0.2
0.3
0.4
0.5
0.6
budg
et s
hare
couple & 1 kid
couple & 2 kids
10th bootstrap percentile
90th bootstrap percentile
SI curve (1 kid)
SI curve (2 kids)
Fig 3c: Shape Invariant Engel Curve: Food Share
3 3.5 4 4.5 5 5.5 6 6.5
log total expenditure
0.03
0.04
0.05
0.06
0.07
0.08
0.09bu
dget
sha
re
couple & 1 kid
couple & 2 kids
10th bootstrap percentile
90th bootstrap percentile
SI curve (1 kid)
SI curve (2 kids)
Fig 3d: Shape Invariant Engel Curve: Alcohol Share
Figure 10a: US Gasoline Demand: Conditional Mean for Upper Quartile of Income
0.18 0.2 0.22 0.24 0.26 0.28 0.3 0.32 0.34 0.36 0.386.9
7
7.1
7.2
7.3
7.4
7.5
7.6
7.7
7.8
7.9Demand estimates and confidence interval at upper income group
log price
log
dem
an
d
unconstrained estimate
constrained estimatesimultaneous CI (upper)
simultaneous CI (lower)
Blundell, Horowitz and Parey (2008)
Figure 10a: US Gasoline Demand: Conditional Mean for Median Income
Blundell, Horowitz and Parey (2008)
0.18 0.2 0.22 0.24 0.26 0.28 0.3 0.32 0.34 0.36 0.386.9
7
7.1
7.2
7.3
7.4
7.5
7.6
7.7Demand estimates and confidence interval at middle income group
log price
log
dem
an
dunconstrained estimate
constrained estimatesimultaneous CI (upper)
simultaneous CI (lower)
Figure 10a: US Gasoline Demand: Conditional Mean for 25% Income
Blundell, Horowitz and Parey (2008)
0.18 0.2 0.22 0.24 0.26 0.28 0.3 0.32 0.34 0.36 0.386.7
6.8
6.9
7
7.1
7.2
7.3
7.4
7.5Demand estimates and confidence interval at lower income group
log price
log
dem
an
d
unconstrained estimate
constrained estimatesimultaneous CI (upper)
simultaneous CI (lower)
Figure 8c: DWL as a % of Tax Paid
Price Change Income DWL (as % of tax paid)
unconstrained constrained log-log
$1.22 - $1.27 $72,500 4.20 % 3.27 % 1.80 %
$57,500 3.08 % 4.50 % 1.80 %
$42,500 -1.33 % 0.72 % 1.79 %
$1.32 - $1.37 $72,500 -3.02 % 0.49 % 1.67 %
$57,500 2.61 % 2.07 % 1.66 %
$42,500 -2.23 % 0.77 % 1.66 %
Blundell, Horowitz and Parey (2008)
Figure 13a Median Gasoline Demand at Median Income
0.2 0.22 0.24 0.26 0.28 0.3 0.32 0.34 0.36 0.38
6.8
7
7.2
7.4
7.6
7.8
8
log price
log
gal
lon
s
CONFIDENCE INTERVALS, tau=0.5, middle income group (alpha=0.1)
Blundell, Horowitz and Parey (2009)
Figure 13b Median Gasoline Demand at 75% Income
0.2 0.22 0.24 0.26 0.28 0.3 0.32 0.34 0.36 0.38
6.8
7
7.2
7.4
7.6
7.8
8
log price
log
gallo
nsCONFIDENCE INTERVALS, tau=0.5, upper income group (alpha=0.1)
Blundell, Horowitz and Parey (2009)
Figure 13d Gasoline Demand Quantiles at Median Income
0.2 0.22 0.24 0.26 0.28 0.3 0.32 0.34 0.36 0.386.6
6.8
7
7.2
7.4
7.6
7.8
8Quartile estimates (middle income group)
Blundell, Horowitz and Parey (2009)
0.2 0.22 0.24 0.26 0.28 0.3 0.32 0.34 0.36 0.38
6.4
6.6
6.8
7
7.2
7.4
7.6
7.8
8
8.2
Quantile estimates (median income group)
Figure 13e Gasoline Demand Quantiles at Median Income
Blundell, Horowitz and Parey (2009)
Figure 8a: Distance as an Instrument for Gasoline Price
Figure 8b: Nonparametric Exogeneity Test, By Income
income category obs. test stat.
critical value
alpha=0.05
rejection alpha=0.05
critical value
alpha=0.1
rejection alpha=0.1
25% 235 0.039 0.645 No 0.471 No
50% 432 0.298 0.491 No 0.357 No
75% 194 0.065 0.293 No 0.221 No
Notes: Cross-validation of bandwidth to estimate fXW results in hXW = 0.27.
Bandwidth to estimate fX is chosen as hX = n^(1/5 - 7/24)*h_XW (as in Blundell & Horowitz 2007, Section 4).
Blundell, Horowitz and Parey (2008)
Zero-rated:FoodConstruction of new dwellingsDomestic passenger transportInternational passenger transportBooks, newspapers and magazinesChildren’s clothingDrugs and medicines on prescriptionVehicles and other supplies to people with disabilitiesCycle helmets
Reduced-rated:Domestic fuel and powerContraceptivesChildren’s car seatsSmoking cessation productsResidential conversions and renovations
VAT-exempt:Rent on domestic dwellingsRent on commercial propertiesPrivate educationHealth servicesPostal servicesBurial and cremationFinance and insurance
Estimated cost (£m)11,3008,2002,5001501,7001,3501,35035010
2,95010510150
3,5002003009002001004,500
Indirect Taxation – UK case
Bread and Cereals Negative
Meat and Fish Negative
Dairy products Negative
Tea and coffee Negative
Fruit and vegetables Negative
Food eaten out Positive
Beer Positive
Wine and spirits Positive
Domestic fuels Negative
Household goods and services Positive
Adult clothing Positive
Childrens’ clothing Negative
Petrol and diesel Positive
Leisure goods and services Positive
Impact on budget share of an additional hour workedConditional on income and prices
Source: QUAIDS on UK FES, MR1
Effect of base broadening reform with earnings tax reform compensation, by expenditure decile
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Poorest 2 3 4 5 6 7 8 9 Richest
Expenditure decile group
-£8
-£6
-£4
-£2
£0
£2
£4
£6
£8
£10
% rise in COL % rise in inc cash gain/loss
Effect of base broadening reform with earnings tax instruments as compensation (MRII), by income decile
Reform revenue neutral and designed to leave effective tax rates on earnings unchanged
EMTR: before and after indirect tax reform40
%45
%50
%55
%60
%
0 100 200 300 400 500 600 700 800 900 1000 1100 1200
Gross earnings (£/week)
Before reform After reform
35
%40
%45
%50
%55
%
0 100 200 300 400 500 600 700 800 900 1000 1100 1200
Gross earnings (£/week)
Before reform After reform
Reform revenue neutral and designed to leave effective tax rates on earnings unchanged
PTR: before and after indirect tax reform
Welfare gains - Distribution of EV/x by ln(x)
Source: MRII
ln x
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