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On the Distributional Effects of Income in an Aggregate Consumption Relation

  • Manisha Chakrabarty

    ()

    (Keele University, Department of Economics)

  • Anke Schmalenbach

    ()

    (Department of Economics, University of Bonn)

  • Jeffrey Racine

    ()

    (Department of Economics, Syracuse University)

In this paper we analyze the relevance of characteristics of the income distribution in an aggregate consumption relation. In particular, we use a statistical distributional approach toward aggregation in order to model the aggregate consumption relation of a heterogeneous population, and apply it to UK-Family Expenditure Survey data for the years 1974-1993. We consider a nonparametric estimation methodology, which accounts for the presence of continuous and discrete variables, and, for comparison purposes, a linear parametric method. A bootstrap test on the nonparametrically estimated parameters suggests that, in addition to the mean, the dispersion of income is also relevant. Additionally, the time-invariance of the parameters of the aggregate relation is rejected. These findings have important implications for constructing empirically sound models of aggregate consumption expenditure.

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Paper provided by Centre for Economic Research, Keele University in its series Keele Economics Research Papers with number KERP 2004/09.

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Length: 30 pages
Date of creation: Nov 2004
Date of revision:
Publication status: Forthcoming in Canadian Journal of Economics
Handle: RePEc:kee:kerpuk:2004/09
Contact details of provider: Postal: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom
Phone: +44 (0)1782 584581
Fax: +44 (0)1782 717577
Web page: http://www.keele.ac.uk/depts/ec/cer/
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Order Information: Postal: Centre for Economic Research, Research Institute for Public Policy and Management, Keele University, Staffordshire ST5 5BG - United Kingdom
Web: http://www.keele.ac.uk/depts/ec/cer/pubs_kerps.htm Email:


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