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The homogeneous marginal utility of income assumption

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  • Demuynck, T.

    (Microeconomics & Public Economics)

Abstract

We develop a test to verify if every agent from a population of heterogeneous consumers has the same marginal utility of income function. This homogeneous marginal utility of income assumption is often (implicitly) used in applied demand studies because it has nice aggregation properties and facilitates welfare analysis. If a dataset satisfies our test, we can further identify the common marginal utility of income function. We apply our results using a US cross sectional dataset on food consumption.

Suggested Citation

  • Demuynck, T., 2015. "The homogeneous marginal utility of income assumption," Research Memorandum 013, Maastricht University, Graduate School of Business and Economics (GSBE).
    • Handle: RePEc:unm:umagsb:2015013
    DOI: 10.26481/umagsb.2015013
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    References listed on IDEAS

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