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Giffen Behavior: Theory and Evidence

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  • 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," NBER Working Papers 13243, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:13243
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    References listed on IDEAS

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    1. Gilley, Otis W & Karels, Gordon V, 1991. "In Search of Giffen Behavior," Economic Inquiry, Western Economic Association International, vol. 29(1), pages 182-189, January.
    2. Battalio, Raymond C & Kagel, John H & Kogut, Carl A, 1991. "Experimental Confirmation of the Existence of a Giffen Good," American Economic Review, American Economic Association, vol. 81(4), pages 961-970, September.
    3. Sherwin Rosen, 1999. "Potato Paradoxes," Journal of Political Economy, University of Chicago Press, vol. 107(S6), pages 294-313, December.
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    4. Terrence McDonough & Joseph Eisenhauer, 1995. "Sir Robert Giffen and the Great Potato Famine: A Discussion of the Role of a Legend in Neoclassical Economics," Journal of Economic Issues, Taylor & Francis Journals, vol. 29(3), pages 747-759, September.
    5. George J. Stigler, 1947. "Notes on the History of the Giffen Paradox," Journal of Political Economy, University of Chicago Press, vol. 55(2), pages 152-152.
    6. Kelvin J. Lancaster, 1966. "A New Approach to Consumer Theory," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 132-132.
    7. Dougan, William R, 1982. "Giffen Goods and the Law of Demand," Journal of Political Economy, University of Chicago Press, vol. 90(4), pages 809-815, August.
    8. 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.
    9. Thomas, Duncan & Strauss, John, 1997. "Health and wages: Evidence on men and women in urban Brazil," Journal of Econometrics, Elsevier, vol. 77(1), pages 159-185, March.
    10. Boland, L A, 1977. "Giffen Goods, Market Prices and Testability," Australian Economic Papers, Wiley Blackwell, vol. 16(28), pages 72-85, June.
    11. Koenker, Roger, 1977. "Was Bread Giffen? The Demand for Food in England Circa 1790," The Review of Economics and Statistics, MIT Press, vol. 59(2), pages 225-229, May.
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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. Gheorghe Savoiu & Vasile Dinu, 2015. "Economic paradoxism and meson economics," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 17(39), pages 776-776, May.
    3. Kris De Jaegher, 2009. "Asymmetric Substitutability: Theory And Some Applications," Economic Inquiry, Western Economic Association International, vol. 47(4), pages 838-855, October.
    4. Matthew A. Hanson, 2007. "The Economics of Roadside Bombs," Working Papers 68, Department of Economics, College of William and Mary.
    5. Jensen, Robert T. & Miller, Nolan, 2008. "The Impact of the World Food Price Crisis on Nutrition in China," Working Paper Series rwp08-039, Harvard University, John F. Kennedy School of Government.
    6. Grady Mark F., 2009. "Unavoidable Accident," Review of Law & Economics, De Gruyter, vol. 5(1), pages 177-231, April.

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    More about this item

    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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