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Aggregation, Distribution and Dynamics in the Linear and Quadratic Expenditure Systems

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  • Buse, Adolf

Abstract

Using Canadian data (1965-86), the author confirms and extends Thomas M. Stoker's (1986) results on the rule of distributional effects in demand systems. The confirmation consists of evidence from the linear expenditure system model showing that distributional effects are statistically significant and can displace AR(1) dynamics in the disturbances. The extension is made to the quadratic expenditure system model and an argument is advanced that standard habit formation dynamics may reflect omitted distributional effects. The evidence supports this conjecture. This suggests that the author may have been drawing the wrong conclusions from expenditure studies. Rather than inferring dynamic behavior, he should have been concluding that these models are misspecified. Copyright 1992 by MIT Press.

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  • Buse, Adolf, 1992. "Aggregation, Distribution and Dynamics in the Linear and Quadratic Expenditure Systems," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 45-53, February.
    • Handle: RePEc:tpr:restat:v:74:y:1992:i:1:p:45-53
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    Cited by:

    1. LaFrance, Jeffrey T., 1999. "An Econometric Model of the Demand for Food and Nutrition," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt2z5516c2, Department of Agricultural & Resource Economics, UC Berkeley.
    2. Bente Halvorsen & Bodil M. Larsen, 2008. "The Role of Heterogeneous Demand for Temporal and Structural Aggregation Bias," Discussion Papers 537, Statistics Norway, Research Department.
    3. LaFrance, Jeffrey T., 2008. "The structure of US food demand," Journal of Econometrics, Elsevier, vol. 147(2), pages 336-349, December.
    4. Dong, Diansheng & Capps, Oral, Jr., 1998. "Impacts Of Income Distribution On Market Demand," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20996, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Bente Halvorsen, 2006. "When can micro properties be used to predict aggregate demand?," Discussion Papers 452, Statistics Norway, Research Department.

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