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Preference shifts and the change of consumption composition

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  • Addessi, William

Abstract

While most of the literature explaining the change in consumption composition has focused on the role of relative prices and non-homothetic preferences, this paper examines the importance of preference shifts. I introduce dynamics in preferences and find that they play a relevant role and that their exclusion worsens model performance at least as much as the exclusion of allowing non-homothetic preferences.

Suggested Citation

  • Addessi, William, 2014. "Preference shifts and the change of consumption composition," Economics Letters, Elsevier, vol. 125(1), pages 14-17.
    • Handle: RePEc:eee:ecolet:v:125:y:2014:i:1:p:14-17
    DOI: 10.1016/j.econlet.2014.08.001
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    1. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(4), pages 869-882.
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    6. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 467-498, June.
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    10. Addessi, William & Busato, Francesco, 2011. "Preference shifts between consumption goods and sectoral changes," Economics Letters, Elsevier, vol. 111(3), pages 213-216, June.
    11. Herrendorf, Berthold & Rogerson, Richard & Valentinyi, Ákos, 2014. "Growth and Structural Transformation," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 855-941, Elsevier.
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    14. Phelan, Christopher & Trejos, Alberto, 2000. "The aggregate effects of sectoral reallocations," Journal of Monetary Economics, Elsevier, vol. 45(2), pages 249-268, April.
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    16. Horvath, Michael, 2000. "Sectoral shocks and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 69-106, February.
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    Cited by:

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    2. William Addessi & Manuela Pulina & Federico Sallusti, 2017. "Impact of Changes in Consumer Preferences on Sectoral Labour Reallocation: Evidence from the Italian Economy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(3), pages 348-365, June.
    3. Addessi, William, 2018. "Population age structure and consumption expenditure composition: Evidence from European countries," Economics Letters, Elsevier, vol. 168(C), pages 18-20.

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    More about this item

    Keywords

    Preference shifts; Structural transformation; Multisector models; Consumption;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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