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On the Distributional Effects of Income in an Aggregate Consumption Relation

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Author Info
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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Abstract

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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File URL: http://www.keele.ac.uk/depts/ec/wpapers/kerp0409.pdf
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Publisher Info
Paper provided by Centre for Economic Research, Keele University in its series Keele Economics Research Papers with number KERP 2004/09.

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Length: 30 pages
Date of creation: Nov 2004
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Publication status: Forthcoming in Canadian Journal of Economics
Handle: RePEc:kee:kerpuk:2004/09

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Postal: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom
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Postal: Centre for Economic Research, Research Institute for Public Policy and Management, Keele University, Staffordshire ST5 5BG - United Kingdom
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Related research
Keywords: Aggregate Consumption Heterogeneity Dispersion Local Linear Regression Average Derivative

Other versions of this item:

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

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  1. Michal Paluch & Alois Kneip & Werner Hildenbrand, . "Individual versus Aggregate Income Elasticities for Heterogeneous Populations," Bonn Econ Discussion Papers bgse13_2007, University of Bonn, Germany. [Downloadable!]
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