IDEAS home Printed from https://ideas.repec.org/p/ssa/lemwps/2007-24.html
   My bibliography  Save this paper

On the distributional properties of household consumption expenditures. The case of Italy

Author

Listed:
  • Giorgio Fagiolo
  • Lucia Alessi
  • Matteo Barigozzi
  • Marco Capasso

Abstract

In this paper we explore the statistical properties of the distributions of consumption expenditures for a large sample of Italian households in the period 1989-2004. Goodness-of-fit tests show that household aggregate (and age-conditioned) consumption distributions are not log-normal. Rather, their logs can be invariably characterized by asymmetric exponential-power densities. Departures from log-normality are mainly due to the presence of thick lower tails coexisting with upper tails thinner than Gaussian ones. The emergence of this irreducible heterogeneity in statistical patterns casts some doubts on the attempts to explain log-normality of household consumption patterns by means of simple models based on Gibrat's Law applied to permanent income and marginal utility.

Suggested Citation

  • Giorgio Fagiolo & Lucia Alessi & Matteo Barigozzi & Marco Capasso, 2007. "On the distributional properties of household consumption expenditures. The case of Italy," LEM Papers Series 2007/24, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    • Handle: RePEc:ssa:lemwps:2007/24
    as

    Download full text from publisher

    File URL: http://www.lem.sssup.it/WPLem/files/2007-24.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrea Brandolini, 1999. "The Distribution of Personal Income in Post-War Italy: Source Description, Data Quality, and the Time Pattern of Income Inequality," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 58(2), pages 183-239, September.
    2. Giorgio Fagiolo & Mauro Napoletano & Andrea Roventini, 2008. "Are output growth-rate distributions fat-tailed? some evidence from OECD countries," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(5), pages 639-669.
    3. Lerner, Abba P, 1972. "The Economics and Politics of Consumer Sovereignty," American Economic Review, American Economic Association, vol. 62(2), pages 258-266, May.
    4. Callander, Steven & Wilson, Catherine H., 2006. "Context-dependent Voting," Quarterly Journal of Political Science, now publishers, vol. 1(3), pages 227-254, July.
    5. Enelow, James M. & Hinich, Melvin J., 1983. "Voting One Issue at a Time: The Question of Voter Forecasts," American Political Science Review, Cambridge University Press, vol. 77(2), pages 435-445, June.
    6. Sendhil Mullainathan & Joshua Schwartzstein & Andrei Shleifer, 2008. "Coarse Thinking and Persuasion," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(2), pages 577-619.
    7. Drees, Holger & Kaufmann, Edgar, 1998. "Selecting the optimal sample fraction in univariate extreme value estimation," Stochastic Processes and their Applications, Elsevier, vol. 75(2), pages 149-172, July.
    8. Marco Capasso & Lucia Alessi & Matteo Barigozzi & Giorgio Fagiolo, 2009. "On Approximating The Distributions Of Goodness-Of-Fit Test Statistics Based On The Empirical Distribution Function: The Case Of Unknown Parameters," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 12(02), pages 157-167.
    9. Erich Battistin & Richard Blundell & Arthur Lewbel, 2009. "Why Is Consumption More Log Normal than Income? Gibrat's Law Revisited," Journal of Political Economy, University of Chicago Press, vol. 117(6), pages 1140-1154, December.
    10. Fu, Dongfeng & Pammolli, Fabio & Buldyrev, Sergey V. & Riccaboni, Massimo & Matia, Kaushik & Yamasaki, Kazuko & Stanley, H. Eugene, 2005. "The Growth of Business Firms: Theoretical Framework and Empirical Evidence," MPRA Paper 15905, University Library of Munich, Germany.
    11. F. Clementi & M. Gallegati, 2005. "Pareto's Law of Income Distribution: Evidence for Germany, the United Kingdom, and the United States," Papers physics/0504217, arXiv.org, revised Mar 2006.
    12. Martin Hohnisch & Sabine Pittnauer & Manisha Chakrabarty, 2002. "Empirical Regularities in Distributions of Individual Consumption Expenditure," Papers cond-mat/0201195, arXiv.org.
    13. Youngki Lee & Luis A. N. Amaral & David Canning & Martin Meyer & H. Eugene Stanley, 1998. "Universal features in the growth dynamics of complex organizations," Papers cond-mat/9804100, arXiv.org.
    14. Martin Hohnisch & Sabine Pittnauer & Manisha Chakrabarty, 2002. "Empirical Regularities In Distributions Of Individual Consumption Expenditure," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 13(04), pages 541-549.
    15. Forni, Mario & Lippi, Marco, 1997. "Aggregation and the Microfoundations of Dynamic Macroeconomics," OUP Catalogue, Oxford University Press, number 9780198288008.
    16. Page, Scott E, 1996. "Two Measures of Difficulty," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 321-346, August.
    17. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
    18. Clementi, F. & Gallegati, M., 2005. "Power law tails in the Italian personal income distribution," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 350(2), pages 427-438.
    19. McKelvey, Richard D, 1979. "General Conditions for Global Intransitivities in Formal Voting Models," Econometrica, Econometric Society, vol. 47(5), pages 1085-1112, September.
    20. JuanD. Carrillo & Micael Castanheira, 2008. "Information and Strategic Political Polarisation," Economic Journal, Royal Economic Society, vol. 118(530), pages 845-874, July.
    21. Jarque, Carlos M. & Bera, Anil K., 1980. "Efficient tests for normality, homoscedasticity and serial independence of regression residuals," Economics Letters, Elsevier, vol. 6(3), pages 255-259.
    22. Fryer Roland & Jackson Matthew O., 2008. "A Categorical Model of Cognition and Biased Decision Making," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 8(1), pages 1-44, February.
    23. Scott E. Page, 1996. "Two measures of difficulty (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(2), pages 321-346.
    24. R. Aversi & G. Dosi & G. Fagiolo & M. Meacci & C. Olivetti, 1997. "Demand Dynamics With Socially Evolving Preferences," Working Papers ir97081, International Institute for Applied Systems Analysis.
    25. J. B. Taylor & M. Woodford (ed.), 1999. "Handbook of Macroeconomics," Handbook of Macroeconomics, Elsevier, edition 1, volume 1, number 1.
    26. Giulio Bottazzi & Angelo Secchi, 2006. "Maximum Likelihood Estimation of the Symmetric and Asymmetric Exponential Power Distribution," LEM Papers Series 2006/19, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    27. Bera, Anil K. & Jarque, Carlos M., 1981. "Efficient tests for normality, homoscedasticity and serial independence of regression residuals : Monte Carlo Evidence," Economics Letters, Elsevier, vol. 7(4), pages 313-318.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mundt, Philipp & Oh, Ilfan, 2019. "Asymmetric competition, risk, and return distribution," Economics Letters, Elsevier, vol. 179(C), pages 29-32.
    2. Scharfenaker, Ellis, 2020. "Implications of quantal response statistical equilibrium," Journal of Economic Dynamics and Control, Elsevier, vol. 119(C).
    3. Matteo Barigozzi & Biagio Speciale, 2011. "Immigrants' legal status, permanence in the destination country and the distribution of consumption expenditure," Applied Economics Letters, Taylor & Francis Journals, vol. 18(14), pages 1341-1347.
    4. Mundt, Philipp & Alfarano, Simone & Milaković, Mishael, 2020. "Exploiting ergodicity in forecasts of corporate profitability," Journal of Economic Dynamics and Control, Elsevier, vol. 111(C).
    5. Alfarano, Simone & Milaković, Mishael & Irle, Albrecht & Kauschke, Jonas, 2012. "A statistical equilibrium model of competitive firms," Journal of Economic Dynamics and Control, Elsevier, vol. 36(1), pages 136-149.
    6. Chatterjee, Arnab & Chakrabarti, Anindya S. & Ghosh, Asim & Chakraborti, Anirban & Nandi, Tushar K., 2016. "Invariant features of spatial inequality in consumption: The case of India," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 442(C), pages 169-181.
    7. Matteo Barigozzi & Lucia Alessi & Marco Capasso & Giorgio Fagiolo, 2008. "The Distribution of Consumption-Expenditure Budget Shares. Evidence from Italian Households," LEM Papers Series 2008/18, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    8. David S. Bieri & Casey J. Dawkins, 2019. "Amenities, affordability, and housing vouchers," Journal of Regional Science, Wiley Blackwell, vol. 59(1), pages 56-82, January.
    9. Schulz, Jan & Mayerhoffer, Daniel M., 2021. "A network approach to consumption," BERG Working Paper Series 173, Bamberg University, Bamberg Economic Research Group.
    10. Matteo Barigozzi & Alessio Moneta, 2016. "Identifying the Independent Sources of Consumption Variation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(2), pages 420-449, March.
    11. Barigozzi, Matteo & Alessi, Lucia & Capasso, Marco & Fagiolo, Giorgio, 2012. "The distribution of household consumption-expenditure budget shares," Structural Change and Economic Dynamics, Elsevier, vol. 23(1), pages 69-91.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Luigi Marengo & Corrado Pasquali, 2011. "The construction of choice: a computational voting model," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 6(2), pages 139-156, November.
    2. Luigi Maregno & Corrado Pasquali, 2008. "A computational voting model," LEM Papers Series 2008/24, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. Matteo Barigozzi & Lucia Alessi & Marco Capasso & Giorgio Fagiolo, 2008. "The Distribution of Consumption-Expenditure Budget Shares. Evidence from Italian Households," LEM Papers Series 2008/18, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    4. Barigozzi, Matteo & Alessi, Lucia & Capasso, Marco & Fagiolo, Giorgio, 2012. "The distribution of household consumption-expenditure budget shares," Structural Change and Economic Dynamics, Elsevier, vol. 23(1), pages 69-91.
    5. Giorgio Fagiolo & Mauro Napoletano & Andrea Roventini, 2008. "Are output growth-rate distributions fat-tailed? some evidence from OECD countries," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 23(5), pages 639-669.
    6. Schulz, Jan & Mayerhoffer, Daniel M., 2021. "A network approach to consumption," BERG Working Paper Series 173, Bamberg University, Bamberg Economic Research Group.
    7. Gennaro Amendola & Luigi Marengo & Simona Settepanella, 2012. "Decidability and manipulability in social choice," LEM Papers Series 2012/11, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    8. Luigi Marengo & Davide Pirino & Simona Settepanella & Akimichi Takemura, 2012. "Decidability in complex social choices," LEM Papers Series 2012/12, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    9. Matthias Duschl & Thomas Brenner, 2013. "Characteristics of regional industry-specific employment growth rates' distributions," Papers in Regional Science, Wiley Blackwell, vol. 92(2), pages 249-270, June.
    10. Matthias Duschl & Thomas Brenner, 2011. "Characteristics of Regional Industry-specific Employment Growth – Empirical Evidence for Germany," Working Papers on Innovation and Space 2011-07, Philipps University Marburg, Department of Geography.
    11. Luigi Marengo & Simona Settepanella, 2010. "Social choice among complex objects," LEM Papers Series 2010/02, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    12. Thomas Brenner & Matthias Duschl, 2018. "Modeling Firm and Market Dynamics: A Flexible Model Reproducing Existing Stylized Facts on Firm Growth," Computational Economics, Springer;Society for Computational Economics, vol. 52(3), pages 745-772, October.
    13. Andrew G. Haldane & Arthur E. Turrell, 2019. "Drawing on different disciplines: macroeconomic agent-based models," Journal of Evolutionary Economics, Springer, vol. 29(1), pages 39-66, March.
    14. Antonio Cutanda & José M. Labeaga & Juan A. Sanchis-Llopis, 2020. "Aggregation biases in empirical Euler consumption equations: evidence from Spanish data," Empirical Economics, Springer, vol. 58(3), pages 957-977, March.
    15. repec:hal:spmain:info:hdl:2441/9848 is not listed on IDEAS
    16. repec:hal:wpspec:info:hdl:2441/9848 is not listed on IDEAS
    17. Williams, Michael A. & Baek, Grace & Li, Yiyang & Park, Leslie Y. & Zhao, Wei, 2017. "Global evidence on the distribution of GDP growth rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 468(C), pages 750-758.
    18. Thomas Brenner & Matthias Duschl, 2014. "Modelling Firm and Market Dynamics - A Flexible Model Reproducing Existing Stylized Facts," Working Papers on Innovation and Space 2014-07, Philipps University Marburg, Department of Geography.
    19. repec:spo:wpecon:info:hdl:2441/9848 is not listed on IDEAS
    20. repec:spo:wpmain:info:hdl:2441/9848 is not listed on IDEAS
    21. Marvin Goodfriend, 2004. "Monetary policy in the new neoclassical synthesis : a primer," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 90(Sum), pages 21-45.
    22. Philippe Jehiel, 2022. "Analogy-Based Expectation Equilibrium and Related Concepts:Theory, Applications, and Beyond," Working Papers halshs-03735680, HAL.
    23. Campi, Mercedes & Dueñas, Marco, 2020. "Volatility and economic growth in the twentieth century," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 330-343.
    24. Hernan Mondani & Petter Holme & Fredrik Liljeros, 2014. "Fat-Tailed Fluctuations in the Size of Organizations: The Role of Social Influence," PLOS ONE, Public Library of Science, vol. 9(7), pages 1-9, July.

    More about this item

    Keywords

    Consumption; Asymmetric Exponential-Power Distribution; Income Distribution; Log-Normal Distribution; Gibrat's Law;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ssa:lemwps:2007/24. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/labssit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.