Analysing household bottled water and water purifier expenditures: simultaneous equation bivariate Tobit model

Abstract

Household bottled water and water purifier expenditures are examined by taking into account three important characteristics: expenditures may be censored at zero, may be interdependent across expenditure type, and may be endogenously and jointly determined. Censoring, interdependence, and endogeneity of the two expenditures are examined through simultaneous equation bivariate Tobit model using household survey data.

Notes

The two expenditure types are representative ‘defensive expenditures’ that are used to avoid any harm from intake of tap water that may be of low quality or contaminated (McConnell and Rosado, 2000).

The model was first considered in Amemiya (1974), which analysed the joint determination of work hours of a husband and wife where the hours are naturally constrained to be nonnegative.