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Gorman Revisited: Nonparametric Conditions for Exact Linear Aggregation

Listed author(s):
  • Laurens Cherchye
  • Ian Crawford
  • Bram De Rock
  • Frederic Vermeulen

In the tradition of Afriat (1967), Diewert (1973) and Varian (1982), we provide arevealed preference characterisation of exact linear aggregation. This guarantees thataggregate demand can be written as a function of prices and aggregate income alone,while abstracting from income-distributional aspects. We also establish nonparametricconditions for individual consumption to be representable in terms of Gorman PolarForm preferences. Our results are simple and complement those of Gorman (1953,1961). We illustrate the practical usefulness of our results by means of an empiricalapplication to a Spanish balanced microdata panel.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers ECARES with number ECARES 2015-45.

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Length: 22 p.
Date of creation: Nov 2015
Publication status: Published by:
Handle: RePEc:eca:wpaper:2013/221188
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  1. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
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  10. Donald J. Brown & Chris Shannon, 2000. "Uniqueness, Stability, and Comparative Statics in Rationalizable Walrasian Markets," Econometrica, Econometric Society, vol. 68(6), pages 1529-1540, November.
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  12. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2007. "The Collective Model of Household Consumption: A Nonparametric Characterization," Econometrica, Econometric Society, vol. 75(2), pages 553-574, 03.
  13. Richard W. Blundell & Martin Browning & Ian A. Crawford, 2003. "Nonparametric Engel Curves and Revealed Preference," Econometrica, Econometric Society, vol. 71(1), pages 205-240, January.
  14. Richard Blundell & Xiaohong Chen & Dennis Kristensen, 2007. "Semi-Nonparametric IV Estimation of Shape-Invariant Engel Curves," Econometrica, Econometric Society, vol. 75(6), pages 1613-1669, November.
  15. Muellbauer, John, 1976. "Community Preferences and the Representative Consumer," Econometrica, Econometric Society, vol. 44(5), pages 979-999, September.
  16. Christopher D. Carroll, 2000. "Requiem for the Representative Consumer? Aggregate Implications of Microeconomic Consumption Behavior," American Economic Review, American Economic Association, vol. 90(2), pages 110-115, May.
  17. Ian Crawford & Krishna Pendakur, 2013. "How many types are there?," Economic Journal, Royal Economic Society, vol. 123, pages 77-95, 03.
  18. Richard Blundell & Martin Browning & Ian Crawford, 2008. "Best Nonparametric Bounds on Demand Responses," Econometrica, Econometric Society, vol. 76(6), pages 1227-1262, November.
  19. Ian Crawford, 2010. "Habits Revealed," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1382-1402.
  20. Hal R. Varian, 1983. "Non-parametric Tests of Consumer Behaviour," Review of Economic Studies, Oxford University Press, vol. 50(1), pages 99-110.
  21. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
  22. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  23. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2011. "The revealed preference approach to collective consumption behavior: nonparametric testing and sharing rule recovery," ULB Institutional Repository 2013/98560, ULB -- Universite Libre de Bruxelles.
  24. Robert A. Pollak, 1971. "Additive Utility Functions and Linear Engel Curves," Review of Economic Studies, Oxford University Press, vol. 38(4), pages 401-414.
  25. Dow, James & da Costa Werlang, Sergio Ribeiro, 1988. "The consistency of welfare judgments with a representative consumer," Journal of Economic Theory, Elsevier, vol. 44(2), pages 269-280, April.
  26. Laurens Cherchye & Bram De Rock & Frederic Vermeulen, 2011. "The Revealed Preference Approach to Collective Consumption Behaviour: Testing and Sharing Rule Recovery," Review of Economic Studies, Oxford University Press, vol. 78(1), pages 176-198.
  27. Browning, Martin, 1989. "A Nonparametric Test of the Life-Cycle Rational Expectations Hypothesis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(4), pages 979-992, November.
  28. Blackorby, Charles & Boyce, Richard & Russell, R Robert, 1978. "Estimation of Demand Systems Generated by the Gorman Polar Form: A Generalization of the S-Branch Utility Tree," Econometrica, Econometric Society, vol. 46(2), pages 345-363, March.
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  32. Varian, Hal R., 1985. "Non-parametric analysis of optimizing behavior with measurement error," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 445-458.
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