Epsilon Archive for Student Projects

Abstract

The purpose of this study is to find the expenditure elasticity of demand for leisure travel abroad by aviation for
Swedish Households. The study uses household expenditure survey data compiled by Statistics Sweden in 2012.
The independent variable ”Flight” has numerous values of zero, as many households spend no money this type
of travel. Having zero values for the dependent variables leads to the so-called censored variable problem where
a regular OLS regression leads to a downward bias. This is a well-known problem for expenditure survey data
that is dealt with using a Tobin Model. This study finds elasticity values ranging from 2.612 to 2.933.
Unfortunately, the models were rejected when the errors of the models failed the tests for Normality and
Homoskedasticity. Suggestions for further research and improved models are made.