Estimation of Price Elasticities with Data from the BLS Consumer Expenditure Surveys

Household budget surveys have had a variety of uses in a long and venerable history, ranging from concern with the “state of the poor” in the late eighteenth- and mid-nineteenth-century England and Continental Europe to a need for weights in the construction of consumer price indices. For economists, the principal use of data from household budget surveys has usually been the analysis of relationships between consumption expenditures and income, that is, with the estimation of Engel curves. As most budget surveys collect only expenditure data, rather than both quantities and prices, it is generally not possible, absent heroic assumptions on the structure of consumer preferences, to estimate full-blown demand functions and hence to obtain estimates of price as well as income elasticities.