Household Consumption of Cheese: An Inverse Hyperbolic Sine Double‐Hurdle Model with Dependent Errors

Abstract The dependent double‐hurdle model is generalized by an inverse hyperbolic sine transformation of the dependent variable. The resulting specification features a flexible parameterization, accommodates heteroskedastic errors, and nests a range of common limited dependent variable models. Results for U.S. household cheese consumption suggest that the homoskedastic and normal double‐hurdle model is misspecified. Income elasticities are small and vary across household groups. Foodstamp recipients are more responsive to income changes than nonrecipients. Foodstamp recipients are also less likely to consume cheese but, conditional on consumption, spend more than nonrecipients.