Money illusion, Gorman and Lau
Any demand equation satisfying Lau’s (1982) Fundamental Theorem of Exact Aggregation and is 0 homogeneous in prices and income will have a Gorman (1981) functional form for each income term. This property does not depend on symmetry or adding up. The implications of this result are illustrated by an extensive example.
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- Howe, Howard & Pollak, Robert A & Wales, Terence J, 1979. "Theory and Time Series Estimation of the Quadratic Expenditure System," Econometrica, Econometric Society, vol. 47(5), pages 1231-47, September.
- Lau, Lawrence J., 1982. "A note on the fundamental theorem of exact aggregation," Economics Letters, Elsevier, vol. 9(2), pages 119-126.
- Muellbauer, John, 1976. "Community Preferences and the Representative Consumer," Econometrica, Econometric Society, vol. 44(5), pages 979-99, September.
- Lewbel, Arthur, 1990. "Full Rank Demand Systems," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(2), pages 289-300, May.
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