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Gorman revisited: nonparametric conditions for exact linear aggregation

  • Laurens CHERCHYE
  • Ian CRAWFORD
  • Bram DE ROCK
  • Frederic VERMEULEN

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

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File URL: http://feb.kuleuven.be/drc/Economics/research/dps-papers/dps-13/dps1305.pdf
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Paper provided by KU Leuven, Faculty of Economics and Business, Department of Economics in its series Working Papers Department of Economics with number ces13.05.

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Date of creation: Mar 2013
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Handle: RePEc:ete:ceswps:ces13.05
Contact details of provider: Web page: http://feb.kuleuven.be/Economics/

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