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Aggregate Consumer's Expenditure and Income

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  • Alois Kneip
  • Werner Hildenbrand
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    Abstract

    The following question is analyzed: under what circumstances can one a stable (i.e., time invariant) functional relationship which links aggregate consumption in period t with aggregate income in period t and another "determinants" of consumtion that refer to periods prior to period t and can be derived from observable distributions of households' characteristics ? The basic hypothesis on which our model is built is the hypothes of a "structurally stable" evolution. This hypothesis has good empirical support. The proposed dynamic model of consumer's expenditure implies implies the observed regularities of aggregate consumption and income data such as the high linear association of aggregate income and consumption for short-run time series. The compatibility of our model with empirical data and its predictive power is discussed using time- series of cross-section data, the U.K. Family Expenditure Survey from 1968 to 84.

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    Bibliographic Info

    Paper provided by University of Bonn, Germany in its series Discussion Paper Serie A with number 456.

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    Length: 40 pages plus pictures
    Date of creation: Oct 1994
    Date of revision:
    Handle: RePEc:bon:bonsfa:456

    Note: This paper consists of two parts, the first is the written part and the second are the graphs which belong to the written part and without which the written part is not understandable. The graph part ist available under the URL ftp://hannibal.econ3.uni-bonn.de/sfb- papers/with2/sfb_a456/ It will be needed a free space of approx. 20 MByte on the harddisk. If there occur any problems please don't hesitate to contact us via e-mail with2@track.or.uni-bonn.de .
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    Related research

    Keywords: Aggregation; consumption function; structural stability; prediction;

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    References

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    1. Simon Kuznets, 1942. "Uses of National Income in Peace and War," NBER Books, National Bureau of Economic Research, Inc, number kuzn42-1, octubre-d.
    2. Wolfgang HÄRDLE & Michael JERISON, 1991. "Cross section Engel Curves over Time," Discussion Papers (REL - Recherches Economiques de Louvain) 1991045, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    3. Maddison, Angus, 1992. " A Long-Run Perspective on Saving," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(2), pages 181-96.
    4. Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(352), pages 661-92, December.
    5. Spanos, Aris, 1989. "Early Empirical Findings on the Consumption Function, Stylized Facts or Fiction: A Retrospective View," Oxford Economic Papers, Oxford University Press, vol. 41(1), pages 150-69, January.
    6. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, octubre-d.
    7. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
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