Manisha Chakrabarty () (Keele University, Department of Economics) Anke Schmalenbach () (Department of Economics, University of Bonn) Jeffrey Racine () (Department of Economics, Syracuse University)
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In this paper we analyze the relevance of characteristics of the income distribution in an aggregate consumption relation. In particular, we use a statistical distributional approach toward aggregation in order to model the aggregate consumption relation of a heterogeneous population, and apply it to UK-Family Expenditure Survey data for the years 1974-1993. We consider a nonparametric estimation methodology, which accounts for the presence of continuous and discrete variables, and, for comparison purposes, a linear parametric method. A bootstrap test on the nonparametrically estimated parameters suggests that, in addition to the mean, the dispersion of income is also relevant. Additionally, the time-invariance of the parameters of the aggregate relation is rejected. These findings have important implications for constructing empirically sound models of aggregate consumption expenditure.
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Paper provided by Centre for Economic Research, Keele University in its series Keele Economics Research Papers with number
KERP 2004/09.
Length: 30 pages Date of creation: Nov 2004 Date of revision: Publication status: Forthcoming in Canadian Journal of Economics Handle: RePEc:kee:kerpuk:2004/09
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