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Income Effects on Services Expenditures

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Engel curves suffer from the fact that habit or addiction effects are not taken into account on cross sections. Also, income effects may differ between social groups, and cross-section parameters may be biased relatively to time-series estimations. We propose to estimate dynamic Engel curves on individual cross-section data using a new instrumentation of past expenditures based on cohort effects and compare the influence of income changes according to static and dynamic estimates. Finally, a domestic production model allows to calculate the opportunity cost of domestic activities and to explain the difference between the U.S. and European expenditures on services. The article uses the 1979, 1984, 1989 and 1995 Insee Family budget surveys.

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  • Francois Gardes & Christophe Starzec, 2004. "Income Effects on Services Expenditures," DEMPATEM Working Papers wp7, AIAS, Amsterdam Institute for Advanced Labour Studies.
  • Handle: RePEc:aia:dempat:wp7
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    1. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
    2. Duncan, G.J. & Gardes, F. & Gaubert, P. & Starzec, C., 1998. "A Comparison of Consumption Models Estimated on American and Polish Panel and Pseudo-Panel Data," Papiers du Laboratoire de Microéconomie Appliquée 1998-09, Université Panthéon-Sorbonne (Paris 1).
    3. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    4. Joseph G. Altonji & Aloysius Siow, 1987. "Testing the Response of Consumption to Income Changes with (Noisy) Panel Data," The Quarterly Journal of Economics, Oxford University Press, vol. 102(2), pages 293-328.
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    Cited by:

    1. William Milberg, Melissa Mahoney, Markus Schneider, Rudiger von Arnim, 2007. "WP 2006-4 Dynamic Gains from U.S. Services Offshoring: A Critical View," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2006-4, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    2. Shiyuan Chen & Sally Wallace, 2009. "Food Consumption in Jamaica: A Household and Social Behavior," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0901, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.

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