Unexploited Connections Between Intra- and Inter-temporal Allocation
This paper shows that a power utility specification of preferences over total expenditure (ie. CRRA preferences) implies that intratemporal demands are in the PIGL/PIGLOG class. This class generates (at most) rank two demand systems and we can test the validity of power utility on cross-section data. Further, if we maintain the assumption of power utility, and within period preferences are not homothetic, then the intertemporal preference parameter is identified by the curvature of Engel curves. Under the power utility assumption, neither Euler equation estimation nor structural consumption function estimation is necessary to identify the power parameter. In our empirical work, we use demand data to estimate the power utility parameter and to test the assumption of the power utility representation. We find estimates of the power parameter larger than obtained from Euler equation estimation, but we reject the power specification of within period utility.
|Date of creation:||Sep 2005|
|Contact details of provider:|| Postal: 1280 Main Street West, Hamilton, Ontario, L8S 4M4|
Phone: (905) 525-9140 ext. 22765
Fax: (905) 521-8232
Web page: http://www.mcmaster.ca/economics/
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.:
- Orazio P. Attanasio & Hamish Low, 2000.
"Estimating Euler Equations,"
NBER Technical Working Papers
0253, National Bureau of Economic Research, Inc.
- Attanasio, Orazio P & Weber, Guglielmo, 1995.
"Is Consumption Growth Consistent with Intertemporal Optimization? Evidence from the Consumer Expenditure Survey,"
Journal of Political Economy,
University of Chicago Press, vol. 103(6), pages 1121-1157, December.
- Orazio P. Attanasio & Guglielmo Weber, 1994. "Is Consumption Growth Consistent with Intertemporal Optimization? Evidence from the Consumer Expenditure Survey," NBER Working Papers 4795, National Bureau of Economic Research, Inc.
- Attanasio, O.P. & Browning, M., 1993.
"Consumption Over the Life Cycle and Over the Business Cycle,"
9314, Tilburg - Center for Economic Research.
- Attanasio, Orazio P & Browning, Martin, 1995. "Consumption over the Life Cycle and over the Business Cycle," American Economic Review, American Economic Association, vol. 85(5), pages 1118-1137, December.
- Attanasio, O.P. & Browning, M.J., 1993. "Consumption over the life cycle and over the business cycle," Discussion Paper 1993-14, Tilburg University, Center for Economic Research.
- Orazio P. Attanasio & Martin Browning, 1993. "Consumption over the Life Cycle and over the Business Cycle," NBER Working Papers 4453, National Bureau of Economic Research, Inc.
- Arthur Lewbel, 2000.
"A Rational Rank Four Demand System,"
Boston College Working Papers in Economics
463, Boston College Department of Economics, revised 04 Apr 2003.
- Stephen G. Donald, 1997. "Inference Concerning the Number of Factors in a Multivariate Nonparametric Relationship," Econometrica, Econometric Society, vol. 65(1), pages 103-132, January.
- Atkeson, A. & Ogaki, M., 1991.
"Wealth-Varying Intertemporal Elasticities of Substitution Evidence from Panel and Aggregate Data,"
RCER Working Papers
303, University of Rochester - Center for Economic Research (RCER).
- Atkeson, Andrew & Ogaki, Masao, 1996. "Wealth-varying intertemporal elasticities of substitution: Evidence from panel and aggregate data," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 507-534, December.
- Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
- Sydney Ludvigson & Christina H. Paxson, 2001.
"Approximation Bias In Linearized Euler Equations,"
The Review of Economics and Statistics,
MIT Press, vol. 83(2), pages 242-256, May.
- Sydney Ludvigson & Christina H. Paxson, 1997. "Approximation bias in linearized Euler equations," Research Paper 9712, Federal Reserve Bank of New York.
- Sydney Ludvigson & Christina H. Paxson, 1999. "Approximation Bias in Linearized Euler Equations," NBER Technical Working Papers 0236, National Bureau of Economic Research, Inc.
- Robert A. Pollak, 1971. "Additive Utility Functions and Linear Engel Curves," Review of Economic Studies, Oxford University Press, vol. 38(4), pages 401-414.
- Richard Blundell & Martin Browning & Costas Meghir, 1993.
"Consumer demand and the life-cycle allocation of household expenditures,"
IFS Working Papers
W93/11, Institute for Fiscal Studies.
- Richard Blundell & Martin Browning & Costas Meghir, 1994. "Consumer Demand and the Life-Cycle Allocation of Household Expenditures," Review of Economic Studies, Oxford University Press, vol. 61(1), pages 57-80.
- Ait-Sahalia, Yacine & Lo, Andrew W., 2000.
"Nonparametric risk management and implied risk aversion,"
Journal of Econometrics,
Elsevier, vol. 94(1-2), pages 9-51.
- Yacine Ait-Sahalia & Andrew W. Lo, 2000. "Nonparametric Risk Management and Implied Risk Aversion," NBER Working Papers 6130, National Bureau of Economic Research, Inc.
- Muellbauer, John, 1976. "Community Preferences and the Representative Consumer," Econometrica, Econometric Society, vol. 44(5), pages 979-999, September.
- Lwebel Arthur & Perraudin William, 1995. "A Theorem on Portfolio Separation with General Preferences," Journal of Economic Theory, Elsevier, vol. 65(2), pages 624-626, April.
- Sule Alan & Martin Browning, 2003. "Estimating Intertemporal Allocation Parameters using Simulated Residual Estimation," CAM Working Papers 2003-03, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
- L. Eeckhoudt & C. Gollier & H. Schlesinger, 2005. "Economic and financial decisions under risk," Post-Print hal-00325882, HAL.
- Pollak, Robert A & Wales, Terence J, 1979. "Welfare Comparisons and Equivalence Scales," American Economic Review, American Economic Association, vol. 69(2), pages 216-221, May.
- Lewbel, Arthur, 1996. "Demand Estimation with Expenditure Measurement Errors on the Left and Right Hand Side," The Review of Economics and Statistics, MIT Press, vol. 78(4), pages 718-725, November.
- Martin Browning & Thomas F. Crossley, 2000. "Luxuries Are Easier to Postpone: A Proof," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 1022-1026, October.
- MacKinnon, James G, 1992. "Model Specification Tests and Artificial Regressions," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 102-146, March.
- James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
- Lewbel, Arthur, 1991. "The Rank of Demand Systems: Theory and Nonparametric Estimation," Econometrica, Econometric Society, vol. 59(3), pages 711-730, May.
When requesting a correction, please mention this item's handle: RePEc:mcm:sedapp:131. 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: ()
If references are entirely missing, you can add them using this form.