Income Effects on Services Expenditures
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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- Joseph G. Altonji & Aloysius Siow, 1987.
"Testing the Response of Consumption to Income Changes with (Noisy) Panel Data,"
The Quarterly Journal of Economics,
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- Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
- 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. Full references (including those not matched with items on IDEAS)
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