Individual versus Aggregate Income Elasticities for Heterogeneous Populations
This paper deals with different concepts of income elasticities of demand for a heterogenous population and the relationship between individual and aggregate elasticities is analyzed. In general, the aggregate elasticity is not equal to the mean of individual elasticities. The difference depends on the heterogeneity of the population and is quantified by a covariance term. Sign and magnitude of this term are determined by an empirical analysis based on the U.K. Family Expenditure Survey. It is shown that the relevant quantities can be identified from cross-section data and, without imposing restrictive structural assumptions, can be estimated by nonparametric techniques. It turns out that the aggregate elasticity significantly overestimates the mean of individual elasticities for many commodity groups.
|Date of creation:||Aug 2007|
|Date of revision:|
|Contact details of provider:|| Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany|
Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rosa L. Matzkin, 1999.
"Nonparametric Estimation of Nonadditive Random Functions,"
38, Universidad de San Andres, Departamento de Economia, revised Sep 2001.
- Rosa L. Matzkin, 2003. "Nonparametric Estimation of Nonadditive Random Functions," Econometrica, Econometric Society, vol. 71(5), pages 1339-1375, 09.
- Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(352), pages 661-92, December.
- John Y. Campbell & N. Gregory Mankiw, 1987.
"Permanent Income, Current Income, and Consumption,"
NBER Working Papers
2436, National Bureau of Economic Research, Inc.
- Manisha Chakrabarty & Anke Schmalenbach & Jeffrey Racine, 2006.
"On the distributional effects of income in an aggregate consumption relation,"
Canadian Journal of Economics,
Canadian Economics Association, vol. 39(4), pages 1221-1243, November.
- Manisha Chakrabarty & Anke Schmalenbach & Jeffrey Racine, 2004. "On the Distributional Effects of Income in an Aggregate Consumption Relation," Keele Economics Research Papers KERP 2004/09, Centre for Economic Research, Keele University.
- Stefan Hoderlein & Enno Mammen, 2007. "Identification of Marginal Effects in Nonseparable Models Without Monotonicity," Econometrica, Econometric Society, vol. 75(5), pages 1513-1518, 09.
- Jürgen Arns & Kaushik Bhattacharya, 2005. "Modelling Aggregate Consumption Growth with Time-Varying Parameters," Bonn Econ Discussion Papers bgse15_2005, University of Bonn, Germany.
- Arthur Lewbel, 1992. "Aggregation with Log-Linear Models," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 635-642.
- Blundell, Richard & Pashardes, Panos & Weber, Guglielmo, 1993. "What Do We Learn About Consumer Demand Patterns from Micro Data?," American Economic Review, American Economic Association, vol. 83(3), pages 570-97, June.
- Lewbel, Arthur, 1989. "Nesting the AIDS and Translog Demand System," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 349-56, May.
- Lewbel, Arthur, 1990. "Income distribution movements and aggregate money illusion," Journal of Econometrics, Elsevier, vol. 43(1-2), pages 35-42.
- Peter Hall & Jeff Racine & Qi Li, 2004. "Cross-Validation and the Estimation of Conditional Probability Densities," Journal of the American Statistical Association, American Statistical Association, vol. 99, pages 1015-1026, December.
- Li, Qi & Racine, Jeffrey S, 2008. "Nonparametric Estimation of Conditional CDF and Quantile Functions With Mixed Categorical and Continuous Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 423-434.
- Racine, Jeff & Li, Qi, 2004. "Nonparametric estimation of regression functions with both categorical and continuous data," Journal of Econometrics, Elsevier, vol. 119(1), pages 99-130, March.
- Hildenbrand, Werner & Kneip, Alois, 2005. "Aggregate behavior and microdata," Games and Economic Behavior, Elsevier, vol. 50(1), pages 3-27, January.
When requesting a correction, please mention this item's handle: RePEc:bon:bonedp:bgse13_2007. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (BGSE Office)
If references are entirely missing, you can add them using this form.