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Engel Curves Specification in an Artificial Model of Consumption Dynamics with Socially Evolving Preferences

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Giorgio Fagiolo

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Abstract

In studying individual consumption behavior, an important issue is the analysis of the relation between commodity expenditure and income (or total expenditure). In this paper we firstly review the more recent theoretical and empirical literature attempting to: (i) derive theory-consistent demand systems models which are able to account for empirically observed non-linearities in total expenditure; (ii) find out whether there exist necessary and sufficient conditions on the across-households distributions such that empirically obtained demand functions still preserve a strong consistency between micro and macro parameters (e.g. consumption-income elasticities). We then apply the techniques discussed in the first part of the paper to the data generated by a computer-simulated model of consumption dynamics presented in Aversi et al. (1999). We find that the model, under a large range of parametrizations, is pretty well equipped to replicate most of the stylized facts displayed by empirically observed consumption patterns, both cross-section and across time.

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Paper provided by Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 2001/16.

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Date of creation: 27 Dec 2001
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Handle: RePEc:ssa:lemwps:2001/16

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Keywords: Household Behavior; Consumption; Demand; Engel Curves; Socially Evolving Preferences; Dynamics.;

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Cited by:
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  1. Shiyuan Chen & Sally Wallace, 2009. "Food Consumption in Jamaica: A Household and Social Behavior," International Studies Program Working Paper Series, at AYSPS, GSU paper0901, International Studies Program, Andrew Young School of Policy Studies, Georgia State University. [Downloadable!]
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