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Title:The rank of a system of engel curves: How many common factors? PDF Logo
Authors:Barigozzi, Matteo
Moneta, Alessio
Issue Date:2011
Series/Report no.:Papers on economics and evolution 1101
Abstract:By representing a system of budget shares as an approximate factor model we determine its rank, i.e. the number of common functional forms, or factors, spanning the space of Engel curves. Once the common factors are estimated via approximate principal components, we identify them by imposing statistical independence. Finally, by means of parametric and non-parametric regressions we estimate the factors as functions of total expenditure. Using data from the U.K. Consumption Expenditure Survey from 1968 to 2006, we find evidence of three common functional forms which correspond to decreasing, increasing and almost constant Engel curves. The household consumption behavior is therefore driven by three factors respectively related to necessities (e.g. food), luxuries (e.g. vehicles), and goods to which is allocated the same percentage of total budget both in rich and in poor households (e.g. housing).
Subjects:Engel Curves
Demand Systems
Factor Models
Independent Component Analysis
JEL:C52
D12
Persistent Identifier of the first edition:urn:nbn:de:gbv:27-20110630-112514-0
Document Type:Working Paper
Appears in Collections:Papers on Economics and Evolution, MPI für Ökonomik

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