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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 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: https://lirias.kuleuven.be/bitstream/123456789/396701/1/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
Handle: RePEc:ete:ceswps:ces13.05
Contact details of provider: Web page: http://feb.kuleuven.be/Economics/

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  1. Varian, Hal R., 1985. "Non-parametric analysis of optimizing behavior with measurement error," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 445-458.
  2. Richard Blundell & Martin Browning & Laurens Cherchye & Ian Crawford & Bram De Rock & Frederic Vermeulen, 2015. "Sharp for SARP: Nonparametric Bounds on Counterfactual Demands," American Economic Journal: Microeconomics, American Economic Association, vol. 7(1), pages 43-60, February.
  3. Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers 99-13, C.V. Starr Center for Applied Economics, New York University.
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  7. Arthur Lewbel & Krishna Pendakur, 2009. "Tricks with Hicks: The EASI Demand System," American Economic Review, American Economic Association, vol. 99(3), pages 827-863, June.
  8. Cherchye, L.J.H. & de Rock, B. & Vermeulen, F.M.P., 2004. "The Collective Model of Household Consumption : A Nonparametric Characterization," Discussion Paper 2004-76, Tilburg University, Center for Economic Research.
  9. Richard Blundell & Martin Browning & Ian Crawford, 2005. "Best Nonparametric Bounds on Demand Responses," CAM Working Papers 2005-16, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  10. Jonathan Heathcote & Kjetil Storesletten & Giovanni L. Violante, 2009. "Quantitative macroeconomics with heterogeneous households," Staff Report 420, Federal Reserve Bank of Minneapolis.
  11. Francois Gourio, 2009. "Disaster risk and business cycles," 2009 Meeting Papers 1176, Society for Economic Dynamics.
  12. Muellbauer, John, 1976. "Community Preferences and the Representative Consumer," Econometrica, Econometric Society, vol. 44(5), pages 979-999, September.
  13. Varian, Hal R, 1982. "The Nonparametric Approach to Demand Analysis," Econometrica, Econometric Society, vol. 50(4), pages 945-973, July.
  14. John Muellbauer, 1975. "Aggregation, Income Distribution and Consumer Demand," Review of Economic Studies, Oxford University Press, vol. 42(4), pages 525-543.
  15. Christopher Carroll, 2000. "Requiem For The Representative Consumer? Aggregate Implications Of Microeconomic Consumption Behavior," Computing in Economics and Finance 2000 320, Society for Computational Economics.
  16. 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.
  17. Michael Jerison, 1994. "Optimal Income Distribution Rules and Representative Consumers," Review of Economic Studies, Oxford University Press, vol. 61(4), pages 739-771.
  18. Chiappori, Pierre-Andre, 1988. "Rational Household Labor Supply," Econometrica, Econometric Society, vol. 56(1), pages 63-90, January.
  19. W. E. Diewert, 1973. "Afriat and Revealed Preference Theory," Review of Economic Studies, Oxford University Press, vol. 40(3), pages 419-425.
  20. 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.
  21. Cherchye, L.J.H. & de Rock, B. & Vermeulen, F.M.P., 2011. "The revealed preference approach to collective consumption behavior : Testing and sharing rule recovery," Other publications TiSEM 11c788ab-cf82-4759-a6a8-3, Tilburg University, School of Economics and Management.
  22. 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.
  23. Donald J. Brown & Caterina Calsamiglia, 2005. "The Nonparametric Approach to Applied Welfare Analysis," Cowles Foundation Discussion Papers 1507, Cowles Foundation for Research in Economics, Yale University.
  24. Lars Ljungqvist & Thomas J. Sargent, 2004. "Recursive Macroeconomic Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 026212274x, December.
  25. Hal R. Varian, 1983. "Non-parametric Tests of Consumer Behaviour," Review of Economic Studies, Oxford University Press, vol. 50(1), pages 99-110.
  26. Ian Crawford & Krishna Pendakur, 2013. "How many types are there?," Economic Journal, Royal Economic Society, vol. 123, pages 77-95, 03.
  27. 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.
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