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On the distributional effects of income in an aggregate consumption relation

Author

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  • Manisha Chakrabarty
  • Anke Schmalenbach
  • Jeffrey Racine

Abstract

In this paper we analyse the influence of characteristics of the income distribution in modelling aggregate consumption expenditure. We model the aggregate consumption relation of a heterogeneous population, using a statistical distributional approach of aggregation, and apply it to UK‐Family Expenditure Survey data. A bootstrap test based on a non‐parametric estimation methodology, which accounts for the presence of continuous and discrete variables, suggests that the mean and the dispersion of the income distribution significantly influence aggregate consumption expenditure. Also, the parameters of the aggregate relation are time varying. These findings have implications for constructing empirically sound models of aggregate consumption expenditure. Dans ce mémoire, on analyse l'influence des caractéristiques de la répartition des revenus dans la modélisation des dépenses agrégées de consommation. On examine la relation de consommation agrégée d'une population hétérogène à l'aide d'une approche à l'agrégation fondée sur une distribution statistique, et on applique le modèle aux données d'une Enquête sur les dépenses des ménages au Royaume Uni. Un test de type ≪bootstrap≫, construit sur une méthodologie d'estimation non paramétrique, et qui tient compte de la présence de variables continues et discrètes, suggère que la moyenne et la dispersion de la distribution des revenus influencent de manière significative les dépenses de consommation agrégées. Les paramètres de cette relation agrégée sont sensibles au temps. Ces résultats ont des implications pour la construction de modèles empiriques fiables de la relation agrégée des dépenses de consommation.

Suggested Citation

  • Manisha Chakrabarty & Anke Schmalenbach & Jeffrey Racine, 2006. "On the distributional effects of income in an aggregate consumption relation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(4), pages 1221-1243, November.
    • Handle: RePEc:wly:canjec:v:39:y:2006:i:4:p:1221-1243
    DOI: 10.1111/j.1540-5982.2006.00388.x
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    Cited by:

    1. Jakubik, Petr, 2011. "Households response to economic crisis," BOFIT Discussion Papers 7/2011, Bank of Finland, Institute for Economies in Transition.
    2. repec:zbw:bofitp:2011_007 is not listed on IDEAS
    3. Paluch, Michal & Kneip, Alois & Hildenbrand, Werner, 2007. "Individual versus Aggregate Income Elasticities for Heterogeneous Populations," Bonn Econ Discussion Papers 13/2007, University of Bonn, Bonn Graduate School of Economics (BGSE).
    4. Petr Jakubík, 2011. "Household Balance Sheets and Economic Crisis," Working Papers IES 2011/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2011.
    5. Jakubik, Petr, 2011. "Households response to economic crisis," BOFIT Discussion Papers 7/2011, Bank of Finland Institute for Emerging Economies (BOFIT).

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    More about this item

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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