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Giffen Behavior: Theory and Evidence

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  • Robert T. Jensen
  • Nolan H. Miller

Abstract

This paper provides the first real-world evidence of Giffen behavior, i.e., upward sloping demand. Subsidizing the prices of dietary staples for extremely poor households in two provinces of China, we find strong evidence of Giffen behavior for rice in Hunan, and weaker evidence for wheat in Gansu. The data provide new insight into the consumption behavior of the poor, who act as though maximizing utility subject to subsistence concerns, with both demand and calorie elasticities depending significantly, and non-linearly, on the severity of their poverty. Understanding this heterogeneity is important for the effective design of welfare programs for the poor.

Suggested Citation

  • Robert T. Jensen & Nolan H. Miller, 2007. "Giffen Behavior: Theory and Evidence," NBER Working Papers 13243, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:13243
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    References listed on IDEAS

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    6. Terrence McDonough & Joseph Eisenhauer, 1995. "Sir Robert Giffen and the Great Potato Famine: A Discussion of the Role of a Legend in Neoclassical Economics," Journal of Economic Issues, Taylor & Francis Journals, vol. 29(3), pages 747-759, September.
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    Cited by:

    1. Robbert Maseland & Albert Vaal, 2011. "Trade, development, and poverty-induced comparative advantage," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 20(2), pages 153-174.
    2. Gheorghe Savoiu & Vasile Dinu, 2015. "Economic paradoxism and meson economics," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 17(39), pages 776-776, May.
    3. Kris De Jaegher, 2009. "Asymmetric Substitutability: Theory And Some Applications," Economic Inquiry, Western Economic Association International, vol. 47(4), pages 838-855, October.
    4. Matthew A. Hanson, 2007. "The Economics of Roadside Bombs," Working Papers 68, Department of Economics, College of William and Mary.
    5. Jensen, Robert T. & Miller, Nolan, 2008. "The Impact of the World Food Price Crisis on Nutrition in China," Working Paper Series rwp08-039, Harvard University, John F. Kennedy School of Government.
    6. Grady Mark F., 2009. "Unavoidable Accident," Review of Law & Economics, De Gruyter, vol. 5(1), pages 177-231, April.

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    More about this item

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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