Work detail

Estimating the quadratic almost ideal demand system and the effects of population ageing in the Czech Republic

Author: Bc. Michael Bílý
Year: 2016 - winter
Leaders: doc. Petr Janský Ph.D.
Consultants:
Work type: Bachelors
Language: English
Pages: 66
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/151457/
Abstract: The aim of this thesis is to estimate the Quadratic Almost Ideal Demand System of non-durable goods
on the Czech Republic Household Budget Survey data in two distinct models. Respective income, own
and cross price elasticities are calculated and we interpret the resulting income, price and demographic
characteristics of the household demand.
The first model is used to estimate the effects of the 2015 Value Added Tax reform in the Czech
Republic, which introduced 10% reduced rate on medication and books. We estimate how much the
reform changes the consumption behaviour of households, the biggest changes are in the commodities of
clothing, books, medications and household goods. The households are estimated to spend 1,049 billion
CZK more on non-durable goods and the VAT revenue is estimated to decrease by 818 million CZK.
The second model is used to predict the effects of the population ageing on the household demand. We
do this in four scenarios to separate effects of the household composition change and to analyse the
composed effects of increasing wealth and redistribution among the working and retired households.
The population ageing has the highest impact on the commodities of food, fuel and light, transport and
leisure services. The shift in composition affects the consumption mostly in the same direction as the
ageing and thus accelerates its effect. The simultaneous effects of an wealth increase and redistribution
are not clear. In some cases they boost the effect from the population ageing, in some they mitigate the
effect and the other they reverse the effect all together.

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