IDEAS home Printed from https://ideas.repec.org/a/wly/canjec/v39y2006i4p1221-1243.html
   My bibliography  Save this article

On the distributional effects of income in an aggregate consumption relation

Author

Listed:
  • Manisha Chakrabarty
  • Anke Schmalenbach
  • Jeffrey Racine

Abstract

In this paper we analyse the influence of characteristics of the income distribution in modelling aggregate consumption expenditure. We model the aggregate consumption relation of a heterogeneous population, using a statistical distributional approach of aggregation, and apply it to UK‐Family Expenditure Survey data. A bootstrap test based on a non‐parametric estimation methodology, which accounts for the presence of continuous and discrete variables, suggests that the mean and the dispersion of the income distribution significantly influence aggregate consumption expenditure. Also, the parameters of the aggregate relation are time varying. These findings have implications for constructing empirically sound models of aggregate consumption expenditure. Dans ce mémoire, on analyse l'influence des caractéristiques de la répartition des revenus dans la modélisation des dépenses agrégées de consommation. On examine la relation de consommation agrégée d'une population hétérogène à l'aide d'une approche à l'agrégation fondée sur une distribution statistique, et on applique le modèle aux données d'une Enquête sur les dépenses des ménages au Royaume Uni. Un test de type ≪bootstrap≫, construit sur une méthodologie d'estimation non paramétrique, et qui tient compte de la présence de variables continues et discrètes, suggère que la moyenne et la dispersion de la distribution des revenus influencent de manière significative les dépenses de consommation agrégées. Les paramètres de cette relation agrégée sont sensibles au temps. Ces résultats ont des implications pour la construction de modèles empiriques fiables de la relation agrégée des dépenses de consommation.

Suggested Citation

  • Manisha Chakrabarty & Anke Schmalenbach & Jeffrey Racine, 2006. "On the distributional effects of income in an aggregate consumption relation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(4), pages 1221-1243, November.
    • Handle: RePEc:wly:canjec:v:39:y:2006:i:4:p:1221-1243
    DOI: 10.1111/j.1540-5982.2006.00388.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1540-5982.2006.00388.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1540-5982.2006.00388.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    2. Härdle, Wolfgang & Hart, Jeffrey D., 1992. "A Bootstrap Test for Positive Definiteness of Income Effect Matrices," Econometric Theory, Cambridge University Press, vol. 8(2), pages 276-292, June.
    3. Orazio P. Attanasio & Guglielmo Weber, 1993. "Consumption Growth, the Interest Rate and Aggregation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(3), pages 631-649.
    4. Hildenbrand, Werner & Kneip, Alois, 2005. "Aggregate behavior and microdata," Games and Economic Behavior, Elsevier, vol. 50(1), pages 3-27, January.
    5. Stoker, Thomas M, 1993. "Empirical Approaches to the Problem of Aggregation Over Individuals," Journal of Economic Literature, American Economic Association, vol. 31(4), pages 1827-1874, December.
    6. Hildenbrand, W. & Kneip, A. & Utikal, K.J., 1998. "Une analyse non parametrique des distributions du revenu et des caracteristiques des menages," Papers 9809, Catholique de Louvain - Institut de statistique.
    7. Alan P. Kirman, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-136, Spring.
    8. HÄRDLE, Wolfgang & HART, Jeffrey D., 1992. "A bootstrap test for positive definiteness of income effect matrices," LIDAM Reprints CORE 999, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. Hildenbrand, Werner, 1998. "How relevant are specifications of behavioral relations on the micro-level for modelling the time path of population aggregates?," European Economic Review, Elsevier, vol. 42(3-5), pages 437-458, May.
    10. Paluch, Michal, 2004. "A Note on the Structural Stability of the Joint Distribution of Income and Wealth," Bonn Econ Discussion Papers 16/2004, University of Bonn, Bonn Graduate School of Economics (BGSE).
    11. Clifford M. Hurvich & Jeffrey S. Simonoff & Chih‐Ling Tsai, 1998. "Smoothing parameter selection in nonparametric regression using an improved Akaike information criterion," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 60(2), pages 271-293.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Petr Jakubík, 2011. "Household Balance Sheets and Economic Crisis," Working Papers IES 2011/20, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jun 2011.
    2. Jakubik, Petr, 2011. "Households response to economic crisis," BOFIT Discussion Papers 7/2011, Bank of Finland, Institute for Economies in Transition.
    3. Jakubik, Petr, 2011. "Households response to economic crisis," BOFIT Discussion Papers 7/2011, Bank of Finland Institute for Emerging Economies (BOFIT).
    4. repec:zbw:bofitp:2011_007 is not listed on IDEAS
    5. Paluch, Michal & Kneip, Alois & Hildenbrand, Werner, 2007. "Individual versus Aggregate Income Elasticities for Heterogeneous Populations," Bonn Econ Discussion Papers 13/2007, University of Bonn, Bonn Graduate School of Economics (BGSE).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Arns, Jürgen & Bhattacharya, Kaushik, 2005. "Modelling Aggregate Consumption Growth with Time-Varying Parameters," Bonn Econ Discussion Papers 15/2005, University of Bonn, Bonn Graduate School of Economics (BGSE).
    2. Zsolt Becsi, 1999. "Heterogeneity and the welfare cost of dynamic factor taxes," FRB Atlanta Working Paper 99-2, Federal Reserve Bank of Atlanta.
    3. von Cramon-Taubadel, Stephan & Loy, Jens-Peter & Meyer, Jochen, 2003. "The Impact Of Data Aggregation On The Measurement Of Vertical Price Transmission: Evidence From German Food Prices," 2003 Annual meeting, July 27-30, Montreal, Canada 21987, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Shin-Ichi Nishiyama, 2011. "The Cross-Euler Equation Approach to testing for the Liquidity Constraint: Evidence from Macro and Micro Data," TERG Discussion Papers 273, Graduate School of Economics and Management, Tohoku University.
    5. Stephan von Cramon-Taubadel & Jens-Peter Loy & Jochen Meyer, 2006. "The impact of cross-sectional data aggregation on the measurement of vertical price transmission: An experiment with German food prices," Agribusiness, John Wiley & Sons, Ltd., vol. 22(4), pages 505-522.
    6. Terry Barker & Sebastian de-Ramon, 2006. "Testing the representative agent assumption: the distribution of parameters in a large-scale model of the EU 1972-1998," Applied Economics Letters, Taylor & Francis Journals, vol. 13(6), pages 395-398.
    7. Chakrabarty, Manisha & Schmalenbach, Anke, 2002. "The Representative Agent Hypothesis: An Empirical Test," Bonn Econ Discussion Papers 26/2002, University of Bonn, Bonn Graduate School of Economics (BGSE).
    8. Hildenbrand, Werner & Kneip, Alois, 2005. "Aggregate behavior and microdata," Games and Economic Behavior, Elsevier, vol. 50(1), pages 3-27, January.
    9. Fischer, Thomas & Riedler, Jesper, 2014. "Prices, debt and market structure in an agent-based model of the financial market," Journal of Economic Dynamics and Control, Elsevier, vol. 48(C), pages 95-120.
    10. Richters, Oliver, 2021. "Modeling the out-of-equilibrium dynamics of bounded rationality and economic constraints," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 846-866.
    11. Attanasio, Orazio P., 1995. "The intertemporal allocation of consumption: theory and evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 42(1), pages 39-56, June.
    12. Matteo Barigozzi & Alessio Moneta, 2016. "Identifying the Independent Sources of Consumption Variation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 31(2), pages 420-449, March.
    13. Erhard Glötzl & Florentin Glötzl & Oliver Richters, 2019. "From constrained optimization to constrained dynamics: extending analogies between economics and mechanics," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 14(3), pages 623-642, September.
    14. Richters, Oliver, 2020. "Between bounded rationality and economic imperatives: essays on out-of-equilibrium dynamics," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 228534, January.
    15. Zizhuo Wang & Chaolin Yang & Hongsong Yuan & Yaowu Zhang, 2021. "Aggregation Bias in Estimating Log‐Log Demand Function," Production and Operations Management, Production and Operations Management Society, vol. 30(11), pages 3906-3922, November.
    16. Leonardo Bargigli & Luca Riccetti & Alberto Russo & Mauro Gallegati, 2020. "Network calibration and metamodeling of a financial accelerator agent based model," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 15(2), pages 413-440, April.
    17. Erik Biørn & Terje Skjerpen, 2002. "Aggregation and Aggregation Biases in Production Functions: A Panel Data Analysis of Translog Models," Discussion Papers 317, Statistics Norway, Research Department.
    18. Alan Kirman, 2016. "Complexity and Economic Policy: A Paradigm Shift or a Change in Perspective? A Review Essay on David Colander and Roland Kupers's Complexity and the Art of Public Policy," Journal of Economic Literature, American Economic Association, vol. 54(2), pages 534-572, June.
    19. Hansen, Hermann-Josef, 1996. "The impact of interest rates on private consumption in Germany," Discussion Paper Series 1: Economic Studies 1996,03e, Deutsche Bundesbank.
    20. Pedro H. Albuquerque, 2003. "A practical log-linear aggregation method with examples: heterogeneous income growth in the USA," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(6), pages 665-678.

    More about this item

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:canjec:v:39:y:2006:i:4:p:1221-1243. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1111/(ISSN)1540-5982 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.