Individual versus Aggregate Income Elasticities for Heterogeneous Populations
نویسندگان
چکیده
The 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.
منابع مشابه
Macroelasticity vs. Individual Elasiticities: The Case of Consumption and Income
In this paper we assess the relationship between the aggregate income elasticity of aggregate demand and individual income elasticities of demand. We show that the aggregate elasticity is equal to the mean of individual elasticities plus a covariance term. Consequently, the sign of this covariance term determines whether the aggregate elasticity overestimates or underestimates the mean of indiv...
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