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The Consumer Consumption Conundrum: An Explanation

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  • Fleissig, Adrian R

Abstract

This paper uses the Fourier flexible form to jointly approximate utility and service flows from durable and nondurable goods. In contrast, parametric functions are usually not flexible enough to accurately approximate nonseparability and often give inconsistent results. This paper calls these inconsistent results the consumer consumption conundrum. The author calculates Morishima elasticities of substitution because Charles Blackorby and Robert R. Russell (1989) show that the Allen-Uzawa measure of substitution is incorrect. Results show that substitution between commodities are variable over time. Therefore, policy intended to affect consumption should take the variability of substitution into account because constant elasticity of substitution functions may give misleading conclusions. Copyright 1997 by Ohio State University Press.

Suggested Citation

  • Fleissig, Adrian R, 1997. "The Consumer Consumption Conundrum: An Explanation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(2), pages 177-192, May.
    • Handle: RePEc:mcb:jmoncb:v:29:y:1997:i:2:p:177-92
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    Cited by:

    1. Adrian R. Fleissig, 2016. "Changing Trends in U.S. Alcohol Demand," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(3), pages 263-276, September.
    2. Fleissig, Adrian R. & Whitney, Gerald A., 2008. "A nonparametric test of weak separability and consumer preferences," Journal of Econometrics, Elsevier, vol. 147(2), pages 275-281, December.
    3. Drake, Leigh & Fleissig, Adrian R., 2010. "Substitution between monetary assets and consumer goods: New evidence on the monetary transmission mechanism," Journal of Banking & Finance, Elsevier, vol. 34(11), pages 2811-2821, November.

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