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Income Elasticities Without Parameters

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Abstract

This paper proposes a simple non-parametric framework to calculate income elasticities from a data set of observed prices and consumed quantities without having to estimate any parameters. The framework can be applied when the price-quantity data satisfies a revealed preference axiom called the strong version of the strong axiom of revealed preference (SSARP). The framework is used to calculate income elasticities for food and non-alcoholic drinks from a rich panel of household expenditures. For this category, it is found that households are rather homogeneous in their demand responses.

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  • Hjertstrand, Per, 2020. "Income Elasticities Without Parameters," Working Paper Series 1324, Research Institute of Industrial Economics.
    • Handle: RePEc:hhs:iuiwop:1324
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    7. Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram & Hjertstrand, Per, 2015. "Revealed preference tests for weak separability: An integer programming approach," Journal of Econometrics, Elsevier, vol. 186(1), pages 129-141.
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    18. Blundell, Richard & Pashardes, Panos & Weber, Guglielmo, 1993. "What Do We Learn About Consumer Demand Patterns from Micro Data?," American Economic Review, American Economic Association, vol. 83(3), pages 570-597, June.
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    Cited by:

    1. Dieter Saelens, 2022. "Unitary or collective households? A nonparametric rationality and separability test using detailed data on consumption expenditures and time use," Empirical Economics, Springer, vol. 62(2), pages 637-677, February.

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    More about this item

    Keywords

    Income elasticity; Non-parametric; Revealed preference; SSARP;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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