Convergence of Consumption Patterns During Macroeconomic Transition: A Model of Demand in Ireland and the OECD
This study uses country-level panel data on consumption in Ireland and seven other OECD countries to examine the evolution of Irish consumption patterns as Ireland underwent rapid macroeconomic growth. Consumption levels obviously increased due to substantially higher incomes, but it is less clear how the shares of different types of goods purchased have changed or whether Ireland's consumption mix has converged with that of other high-income countries. Rankings based on a simple distance measure of consumption similarity suggest that Ireland moved from a "low-income" pattern similar to Portugal or Greece to a "high-income" pattern like that of Canada between 1995 and 2003. Using static and dynamic Almost Ideal Demand System models, we first estimate long- and short-run Irish price and income elasticities for nine categories of commodities between 1976 and 2003. These results provide evidence of substantial habit formation in aggregate consumption. We then estimate a long-run cross-country model covering six aggregate commodity groups between 1975 and 2003. The analysis shows that Ireland's demand parameters remain more similar to those of Greece than to higher-income OECD countries in the sample. Although Ireland has overtaken most other OECD countries in per capita income, it is still converging to a higher-income consumption pattern. We foresee further convergence of Irish expenditure patterns towards a pattern typical of high-income countries.
|Date of creation:||Aug 2007|
|Date of revision:|
|Contact details of provider:|| Postal: Whitaker Square, Sir John Rogerson's Quay, Dublin 2|
Phone: (353-1) 863 2000
Fax: (353-1) 863 2100
Web page: http://www.esri.ie
More information through EDIRC
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.:
- Madden, David, 1996. "Marginal Tax Reform and the Specification of Consumer Demand Systems," Oxford Economic Papers, Oxford University Press, vol. 48(4), pages 556-67, October.
- Brenton, P., 1995.
"Estimates of the Demand for Energy Using Cross-Country Consumption Data,"
95-25, Department of Economics, University of Birmingham.
- Paul Brenton, 1997. "Estimates of the demand for energy using cross-country consumption data," Applied Economics, Taylor & Francis Journals, vol. 29(7), pages 851-859.
- Kenneth Clements & Yanrui Wu & Jing Zhang, 2006.
"Comparing international consumption patterns,"
Springer, vol. 31(1), pages 1-30, March.
- Becker, Gary S, 1992.
"Habits, Addictions, and Traditions,"
Wiley Blackwell, vol. 45(3), pages 327-45.
- Becker, G.S., 1991. "Habits, Addictions, and Traditions," University of Chicago - Economics Research Center 91-8, Chicago - Economics Research Center.
- Gary S. Becker, 1991. "Habits, Addictions, and Traditions," University of Chicago - George G. Stigler Center for Study of Economy and State 71, Chicago - Center for Study of Economy and State.
- Tridimas, George, 2000. "The analysis of consumer demand in Greece. Model selection and dynamic specification," Economic Modelling, Elsevier, vol. 17(4), pages 455-471, December.
- de la Croix, David, 1996.
"Economic development and convergence clubs: the role of inherited tastes and human capital,"
Discussion Papers (IRES - Institut de Recherches Economiques et Sociales)
1996024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Oct 1996.
- de la Croix, David, 2001. "Growth dynamics and education spending: The role of inherited tastes and abilities," European Economic Review, Elsevier, vol. 45(8), pages 1415-1438, August.
- Brian P. Poi, 2002. "From the help desk: Demand system estimation," Stata Journal, StataCorp LP, vol. 2(4), pages 403-410, November.
- Yu, Wusheng & Hertel, Thomas & Preckel, Paul & Eales, James, 2003.
"Projecting World Food Demand Using Alternative Demand Systems,"
GTAP Working Papers
1182, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
- Yu, Wusheng & Hertel, Thomas W. & Preckel, Paul V. & Eales, James S., 2004. "Projecting world food demand using alternative demand systems," Economic Modelling, Elsevier, vol. 21(1), pages 99-129, January.
- Yu, Wusheng & Hertel, Thomas W. & Preckel, Paul V. & Eales, James S., 2003. "Projecting World Food Demand Using Alternative Demand Systems," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25905, International Association of Agricultural Economists.
- Eliyathahby Antony Selvanathan & Saroja Selvanathan, 2003. "Similarities in the Consumption Patterns of the Five Asian Tigers," Asian Economic Journal, East Asian Economic Association, vol. 17(3), pages 297-323, 09.
- Herrmann, Roland & Roder, Claudia, 1995. "Does Food Consumption Converge Internationally? Measurement, Empirical Tests and Determinants," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 22(3), pages 400-414.
- Francisco Alvarez-Cuadrado & Goncalo Monteiro & Stephen Turnovsky, 2004.
"Habit Formation, Catching Up with the Joneses, and Economic Growth,"
UWEC-2004-09-P, University of Washington, Department of Economics, revised Jan 2004.
- Francisco Alvarez-Cuadrado & Goncalo Monteiro & Stephen J. Turnovsky, 2004. "Habit Formation, Catching Up with the Joneses, and Economic Growth," Journal of Economic Growth, Springer, vol. 9(1), pages 47-80, 03.
- John Eakins & Liam Gallagher, 2003. "Dynamic almost ideal demand systems: an empirical analysis of alcohol expenditure in Ireland," Applied Economics, Taylor & Francis Journals, vol. 35(9), pages 1025-1036.
- Conrad, K & Schroder, M, 1991. "Demand for Durable and Nondurable Goods, Environmental Policy and Consumer Welfare," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(3), pages 271-86, July-Sept.
- Conniffe, Denis & Scott, Susan, 1990. "Energy Elasticities: Responsiveness of Demands for Fuels to Income and Price Changes," Research Series, Economic and Social Research Institute (ESRI), number GRS149.
- Johnson, James A, et al, 1992. "Short-Run and Long-Run Elasticities for Canadian Consumption of Alcoholic Beverages: An Error-Correction Mechanism/Cointegration Approach," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 64-74, February.
- Chang, Hui-Shung (Christie) & Bettington, Nicholas, 2001. "Demand for Wine in Australia: Systems Versus Single Equation Approach," Working Papers 12923, University of New England, School of Economics.
- Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
When requesting a correction, please mention this item's handle: RePEc:esr:wpaper:wp205. 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: (Sarah Burns)
If references are entirely missing, you can add them using this form.