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Giffen Behavior: Theory and Evidence

Author

Listed:
  • Robert T. Jensen
  • Nolan H. Miller

Abstract

This paper provides the first real-world evidence of Giffen behavior, i.e., upward sloping demand. Subsidizing the prices of dietary staples for extremely poor households in two provinces of China, we find strong evidence of Giffen behavior for rice in Hunan, and weaker evidence for wheat in Gansu. The data provide new insight into the consumption behavior of the poor, who act as though maximizing utility subject to subsistence concerns, with both demand and calorie elasticities depending significantly, and non-linearly, on the severity of their poverty. Understanding this heterogeneity is important for the effective design of welfare programs for the poor.

Suggested Citation

  • Robert T. Jensen & Nolan H. Miller, 2007. "Giffen Behavior: Theory and Evidence," CID Working Papers 148, Center for International Development at Harvard University.
    • Handle: RePEc:cid:wpfacu:148
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    File URL: https://www.hks.harvard.edu/sites/default/files/centers/cid/files/publications/faculty-working-papers/148.pdf
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    References listed on IDEAS

    as
    1. Charles van Marrewijk & Peter A. G. van Bergeijk, 1990. "Giffen Goods and the Subsistence Level," History of Political Economy, Duke University Press, vol. 22(1), pages 145-148, Spring.
    2. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
    3. Richard G. Lipsey & Gideon Rosenbluth, 1971. "A Contribution to the New Theory of Demand: A Rehabilitation of the Giffen Good," Canadian Journal of Economics, Canadian Economics Association, vol. 4(2), pages 131-163, May.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Robbert Maseland & Albert Vaal, 2011. "Trade, development, and poverty-induced comparative advantage," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 20(2), pages 153-174.
    2. Kris De Jaegher, 2009. "Asymmetric Substitutability: Theory And Some Applications," Economic Inquiry, Western Economic Association International, vol. 47(4), pages 838-855, October.
    3. Grady Mark F., 2009. "Unavoidable Accident," Review of Law & Economics, De Gruyter, vol. 5(1), pages 177-231, April.
    4. Matthew A. Hanson, 2007. "The Economics of Roadside Bombs," Working Papers 68, Department of Economics, College of William and Mary.

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    More about this item

    Keywords

    Giffen Goods; Theory of the Consumer; Consumption; Poverty;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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