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Aggregation under structural stability: the change in consumption of a heterogeneous population

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  • Hildenbrand, Werner
  • Kneip, Alois

Abstract

It is shown how one can effectively use cross-section data in modelling the change over time in aggregate consumption expenditure of a heterogeneous population. The starting point of our aggregation analysis is a dynamic behavioral relation on the household level. Based on certain hypotheses on the evolution of the distribution of income and household characteristics we derive explanatory variables for the change in aggregate consumption expenditure which are quite different from the explanatory variables on the household level. It is shown that U.K. Family Expenditure Data support our theoretical model for aggregate consumption.

Suggested Citation

  • Hildenbrand, Werner & Kneip, Alois, 2002. "Aggregation under structural stability: the change in consumption of a heterogeneous population," Bonn Econ Discussion Papers 4/2002, University of Bonn, Bonn Graduate School of Economics (BGSE).
    • Handle: RePEc:zbw:bonedp:42002
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    References listed on IDEAS

    as
    1. Pischke, Jorn-Steffen, 1995. "Individual Income, Incomplete Information, and Aggregate Consumption," Econometrica, Econometric Society, vol. 63(4), pages 805-840, July.
    2. 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.
    3. Davidson, James E H, et al, 1978. "Econometric Modelling of the Aggregate Time-Series Relationship between Consumers' Expenditure and Income in the United Kingdom," Economic Journal, Royal Economic Society, vol. 88(352), pages 661-692, December.
    4. Hildenbrand, W. & Kneip, A., 1999. "Demand aggregation under structural stability," Journal of Mathematical Economics, Elsevier, vol. 31(1), pages 81-109, February.
    5. J. B. Taylor & M. Woodford (ed.), 1999. "Handbook of Macroeconomics," Handbook of Macroeconomics, Elsevier, edition 1, volume 1, number 1.
    6. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244.
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    Cited by:

    1. 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).
    2. Manisha Chakrabarty & Anke Schmalenbach, 2002. "The Effect of Current Income on Aggregate Consumption," The Economic and Social Review, Economic and Social Studies, vol. 33(3), pages 297-317.

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    More about this item

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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