Money illusion, Gorman and Lau
AbstractAny demand equation satisfying Lau’s (1982) Fundamental Theorem of Exact Aggregation and is 0 homogeneous in prices and income will have a Gorman (1981) functional form for each income term. This property does not depend on symmetry or adding up. The implications of this result are illustrated by an extensive example.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 32709.
Date of creation: 05 Aug 2011
Date of revision:
Demand; exact aggregation; functional form; homogeneity;
Other versions of this item:
- D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
- D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-08-15 (All new papers)
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- Muellbauer, John, 1976. "Community Preferences and the Representative Consumer," Econometrica, Econometric Society, Econometric Society, vol. 44(5), pages 979-99, September.
- Lau, Lawrence J., 1982. "A note on the fundamental theorem of exact aggregation," Economics Letters, Elsevier, vol. 9(2), pages 119-126.
- Lewbel, Arthur, 1990. "Full Rank Demand Systems," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 289-300, May.
- Howe, Howard & Pollak, Robert A & Wales, Terence J, 1979. "Theory and Time Series Estimation of the Quadratic Expenditure System," Econometrica, Econometric Society, Econometric Society, vol. 47(5), pages 1231-47, September.
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