Estimation of Complete Demand System Under Data Limitation A Case Study on Turkey

A common difficulty in estimating demandfunctions for developing countries is the lack of time series data. With the available cross-sectional data resultingfrom extensive surveys on households, most researchers have concentrated on the estima- tion of expenditure elasticities by ignoring the possible impact of prices. Obviously, the results of this partial kind of analysis may not be very reliable for policy design. Deaton (1988) introduced a methodology for using household survey data to estimate price elasticities by making use of spatial variation in prices, but its application requires certain data conditions that may not always be met, as, for example, in the case of Turkey. This article provides a practical solution for such cases by observing that regularly col- lected data on the cost of grouped commodity bundles across re- gions can reflect spatial variation in prices, and, thus, can be used as a proxy for the prices. As compared to previous studies estimat- ing only the expenditure elasticitiesfor Turkey, our results differ, in