Modelling household spending using a random assignment scheme

Tony Lawson

Research output: Contribution to journalArticle

Abstract

Applied demand analysis is usually done by specifying some kind of econometric equation but there are some difficulties associated with this approach. These include the problem of modelling at a highly disaggregated level and the amount of data needed to estimate the parameters for the equations. This paper examines the use of what are known as random assignment schemes as a way to model household expenditure. This approach is based on the idea of predicting the behavioural response of a microsimulation unit by finding a donor, which is in some sense similar to the receiving unit. The paper begins with a brief review of econometric modelling. It then introduces the principles of random assignment schemes. These are expanded upon in an illustrative example to model the effect of changes in the level of income on household expenditure patterns. The model is then used as a platform to show how the random assignment scheme can be used to model a large number of goods, at the level of individual households.
LanguageEnglish
Pages56-75
Number of pages20
JournalInternational Journal of Microsimulation
Volume6
Issue number2
Publication statusPublished - 2013

Fingerprint

Assignment
Econometrics
Modeling
Microsimulation
Unit
Model
Random assignment
Household
Estimate
Household expenditure

Keywords

  • microsimulation
  • household expenditure
  • NetLogo

Cite this

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Modelling household spending using a random assignment scheme. / Lawson, Tony.

In: International Journal of Microsimulation, Vol. 6, No. 2, 2013, p. 56-75.

Research output: Contribution to journalArticle

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