Question: A common method for estimating Engel curves is to model expenditure shares as a function of total expenditure, and possibly demographic variables. A common specification
A common method for estimating Engel curves is to model expenditure shares as a function of total expenditure, and possibly demographic variables. A common specification has the form sgood 5 b0 1 b1ltotexpend 1 demographics 1 u, where sgood is the fraction of spending on a particular good out of total expenditure and ltotexpend is the log of total expenditure. The sign and magnitude of b1 are of interest across various expenditure categories.
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