Giffen Behavior: Theory and Evidence
AbstractThis paper provides the first real-world evidence of Giffen behavior, i.e., upward sloping demand. Subsidizing the prices of dietary staples for extremely poor households in two provinces of China, we find strong evidence of Giffen behavior for rice in Hunan, and weaker evidence for wheat in Gansu. The data provide new insight into the consumption behavior of the poor, who act as though maximizing utility subject to subsistence concerns, with both demand and calorie elasticities depending significantly, and non-linearly, on the severity of their poverty. Understanding this heterogeneity is important for the effective design of welfare programs for the poor.
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Date of creation: Jul 2007
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Find related papers by JEL classification:
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
- I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
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