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Frisch Demand Functions and Intertemporal Substitution in Consumption

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  • Kim, H Youn

Abstract

This paper delineates various intertemporal elasticities of consumption and provides a disaggregate analysis of intertemporal substitution in consumption from its constituent commodity demand. The analysis utilizes Frisch demand function in contrast to the consumption function employed in existing studies. Three intertemporal elasticities of consumption are identified--intertemporal price elasticities of demand, commodity-specific intertemporal substitution elasticities, and the intertemporal substitution elasticity of consumption. Previous studies do not distinguish these intertemporal elasticities and have disregarded the influences of commodity prices on intertemporal substitution. The evidence from estimating the Frisch demand system using U.K. expenditure data suggests the presence of low intertemporal substitution for commodities as well as consumption. Copyright 1993 by Ohio State University Press.

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  • Kim, H Youn, 1993. "Frisch Demand Functions and Intertemporal Substitution in Consumption," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(3), pages 445-454, August.
  • Handle: RePEc:mcb:jmoncb:v:25:y:1993:i:3:p:445-54
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    Cited by:

    1. H. Youn Kim & Keith R. McLaren & K.K. Gary Wong, 2014. "Consumer Demand, Consumption, and Asset Pricing: An Integrated Analysis," Monash Econometrics and Business Statistics Working Papers 4/14, Monash University, Department of Econometrics and Business Statistics.
    2. Daniel Friedman & József Sákovics, 2015. "Tractable consumer choice," Theory and Decision, Springer, vol. 79(2), pages 333-358, September.
    3. Biørn, Erik, 2017. "Revisiting, from a Frischian point of view, the relationship between elasticities of intratemporal and intertemporal substitution," Memorandum 04/2017, Oslo University, Department of Economics.
    4. William Chin, 2004. "Estimating and testing intertemporal preferences: A unified framework for consumption, work and savings," GE, Growth, Math methods 0409002, EconWPA.
    5. Gary Wong, 2001. "Towards A More General Approach To Testing The Time Additivity Hypothesis," School of Economics and Finance Discussion Papers and Working Papers Series 098, School of Economics and Finance, Queensland University of Technology.
    6. Erdinc Telatar & Funda Telatar & Sadiye Turkmen, 2000. "Frisch Demand Functions and Intertemporal Behaviour in Consumption: The Turkish Case," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 39(3), pages 235-246.
    7. Ligon, Ethan, 2017. "Estimating household welfare from disaggregate expenditures," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt5gc4h1fm, Department of Agricultural & Resource Economics, UC Berkeley.
    8. David De La Croix & Jean-Pierre Urbain, 1998. "Intertemporal substitution in import demand and habit formation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 13(6), pages 589-612.
    9. Christian Calmès & Raymond Théoret, 2009. "The Non-Convexity Issues in a Limited-Commitment Economy," RePAd Working Paper Series UQO-DSA-wp012009, Département des sciences administratives, UQO.
    10. H. Kim & Keith McLaren & K. Wong, 2013. "Empirical demand systems incorporating intertemporal consumption dynamics," Empirical Economics, Springer, vol. 45(1), pages 349-370, August.

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