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Testing the homogeneous marginal utility of income assumption


  • Thomas Demuynck


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

Suggested Citation

  • Thomas Demuynck, 2018. "Testing the homogeneous marginal utility of income assumption," Econometric Reviews, Taylor & Francis Journals, vol. 37(10), pages 1120-1136, November.
  • Handle: RePEc:taf:emetrv:v:37:y:2018:i:10:p:1120-1136
    DOI: 10.1080/07474938.2016.1222235

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