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Quantity Aggregation in Consumer Demand Analysis When Physical Quantities Are Observed


  • Nelson, Julie A


A method for estimating price and income elasticities from cross section data devised by Deaton (1986, 1987, 1988) makes implicit use of the Hicks' composite commodity theorem. Recognition of this fact allows theoretically rigorous definition of aggregate composite quantities. A comparison of elasticities of Hicks' composite with elasticities of simple physical quantity measures for the Ivory Coast and the United States demonstrates that use of physical quantity measures can be severely misleading when commodity heterogeneity is substantial. Copyright 1990 by MIT Press.

Suggested Citation

  • Nelson, Julie A, 1990. "Quantity Aggregation in Consumer Demand Analysis When Physical Quantities Are Observed," The Review of Economics and Statistics, MIT Press, vol. 72(1), pages 153-156, February.
  • Handle: RePEc:tpr:restat:v:72:y:1990:i:1:p:153-56

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    References listed on IDEAS

    1. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-1054, July.
    2. Fair, Ray C, 1978. "The Sensitivity of Fiscal Policy Effects to Assumptions about the Behavior of the Federal Reserve," Econometrica, Econometric Society, vol. 46(5), pages 1165-1179, September.
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    4. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    5. Hendry, David F. & Richard, Jean-Francois, 1982. "On the formulation of empirical models in dynamic econometrics," Journal of Econometrics, Elsevier, vol. 20(1), pages 3-33, October.
    6. White, Halbert & Domowitz, Ian, 1984. "Nonlinear Regression with Dependent Observations," Econometrica, Econometric Society, vol. 52(1), pages 143-161, January.
    7. Cumby, Robert E. & Huizinga, John & Obstfeld, Maurice, 1983. "Two-step two-stage least squares estimation in models with rational expectations," Journal of Econometrics, Elsevier, vol. 21(3), pages 333-355, April.
    8. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    9. Stephen K. McNees, 1986. "The accuracy of two forecasting techniques: some evidence and an interpretation," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 20-31.
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    Cited by:

    1. Ingvild Almas, 2012. "International Income Inequality: Measuring PPP Bias by Estimating Engel Curves for Food," American Economic Review, American Economic Association, vol. 102(2), pages 1093-1117, April.
    2. Xavier Irz, 2010. "Modeling physical quantities of food and nutrients consumed from aggregate data-with an application to Finland," Agricultural Economics, International Association of Agricultural Economists, vol. 41(3-4), pages 293-304, May.
    3. Hayden Stewart & Noel Blisard, 2008. "Who Pays More for Food?," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(1), pages 150-168, February.
    4. McKelvey, Christopher, 2011. "Price, unit value, and quality demanded," Journal of Development Economics, Elsevier, vol. 95(2), pages 157-169, July.
    5. Reed, Albert J. & Levedahl, J. William & Clark, J. Stephen, 2003. "Commercial Disappearance and Composite Demand for Food with an Application to U.S. Meats," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(01), April.
    6. Yoko Niimi, 2005. "An Analysis of Household Responses to Price Shocks in Vietnam: Can Unit Values Substitute for Market Prices?," PRUS Working Papers 30, Poverty Research Unit at Sussex, University of Sussex.

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