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Nonparametric Engel Curves and Revealed Preference

Author

Listed:
  • Richard Blundell

    (University College London)

  • Martin Browning

    (Institute of Economics, University of Copenhagen)

  • Ian Crawford

    (University College London)

Abstract

This paper applies revealed preference theory to the nonparametric statistical analysis of consumer demand. It exploits the idea that price-taking individual households in the same market face the same relative prices, in order to smooth across the demands of individuals for each common price regime. This is shown to provide a stochastic structure within which to examine the consistency of household level data and revealed preference theory. An application is made to a long time series of repeated cross-sections from the 1974-1993 UK Family Expenditure Surveys. The consistency of this data with revealed preference theory is examined. Where rejections do occur, suitable adjustments to prices for quality or taste changes are explored. For periods of consistency with revealed preference bounds are placed on true cost of living indices.

Suggested Citation

  • Richard Blundell & Martin Browning & Ian Crawford, 1998. "Nonparametric Engel Curves and Revealed Preference," Discussion Papers 99-07, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:9907
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    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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