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Title:Individual versus aggregate income elasticities for heterogeneous populations PDF Logo
Authors:Paluch, Michal
Kneip, Alois
Hildenbrand, Werner
Issue Date:2007
Series/Report no.:Bonn econ discussion papers 2007,13
Abstract:This paper deals with different concepts of income elasticities of demand for a heterogenous population and the relationship between individual and aggregate elasticities is analyzed. In general, the aggregate elasticity is not equal to the mean of individual elasticities. The difference depends on the heterogeneity of the population and is quantified by a covariance term. Sign and magnitude of this term are determined by an empirical analysis based on the U.K. Family Expenditure Survey. It is shown that the relevant quantities can be identified from cross-section data and, without imposing restrictive structural assumptions, can be estimated by nonparametric techniques. It turns out that the aggregate elasticity significantly overestimates the mean of individual elasticities for many commodity groups.
Subjects:household demand
aggregation
heterogeneity
nonparametric methods
JEL:D11
D12
C14
Document Type:Working Paper
Appears in Collections:Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn

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