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The Representative Agent Hypothesis: An Empirical Test

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  • Schmalenbach, Anke

    (University of Bonn)

  • Manisha Chakrabarty

Abstract

This paper empirically tests the validity of using only /mean /income as a representative variable in the aggregate consumption relation and of assuming time-invariance of the coefficients in this relation, as done in macromodels. We use a statistical distributional approach of aggregation to test these properties on the UK-Family Expenditure Survey [1974-1993]. The time-invariance assumption is rejected in most cases. A bootstrap test also suggests that in addition to mean income, the /dispersion /of income matters significantly for the commodity group /services /in several years and for /total/ /nondurable/ in some years, thus invalidating the /representative agent hypothesis/.

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Bibliographic Info

Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 185.

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Date of creation: 04 Jun 2003
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Handle: RePEc:ecj:ac2003:185

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Web page: http://www.res.org.uk/society/annualconf.asp
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Keywords: representative agent hypothesis; time invariance; heterogeneity;

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  1. Attanasio, Orazio P., 1999. "Consumption," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 11, pages 741-812 Elsevier.
  2. Haerdle,W. & Hart,J.D., 1989. "A bootstrap test forpositive definiteness of income effect matrices," Discussion Paper Serie A 199, University of Bonn, Germany.
  3. Stoker, Thomas M, 1993. "Empirical Approaches to the Problem of Aggregation Over Individuals," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1827-74, December.
  4. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
  5. Hildenbrand, Werner, 1998. "How relevant are specifications of behavioral relations on the micro-level for modelling the time path of population aggregates?," European Economic Review, Elsevier, vol. 42(3-5), pages 437-458, May.
  6. repec:cup:etheor:v:8:y:1992:i:2:p:276-90 is not listed on IDEAS
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Cited by:
  1. Jürgen Arns & Kaushik Bhattacharya, 2005. "Modelling Aggregate Consumption Growth with Time-Varying Parameters," Bonn Econ Discussion Papers bgse15_2005, University of Bonn, Germany.

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