employment impacts of eu biofuels policy combining bottom up technology information and sectoral market simulations in an input output framework this paper analyses the employment consequences of policies aimed to support biofuels in the european union the promotion of biofuel use has been advocated as a means to promote the sustainable use of natural resources and to reduce greenhouse gas emissions originating from transport activities on the one hand and to reduce dependence on imported oil and thereby increase security of the european energy supply on the other hand the employment impacts of increasing biofuels shares are calculated by taking into account a set of elements comprising the demand for capital goods required to produce biofuels the additional demand for agricultural feedstock higher fuel prices or reduced household budget in the case of price subsidisation price effects ensuing from a hypothetical world oil price reduction linked to substitution in the eu market and price impacts on agro food commodities the calculations refer to scenarios for the year 2020 targets as set out by the recent renewable energy roadmap employment effects are assessed in an input output framework taking into account bottom up technology information to specify biofuels activities and linked to partial equilibrium models for the agricultural and energy sectors the simulations suggest that biofuels targets on the order of 10 15 could be achieved without adverse net employment effects

demand elasticities for food products in brazil a two stage budgeting system the object of this article is to estimate demand elasticities for a basket of staple food important for providing the caloric needs of brazilian households these elasticities are useful in the measurement of the impact of structural reforms on poverty a two stage demand system was constructed based on data from household expenditure surveys pof produced by ibge the brazilian bureau of statistics in 1987 88 and 1995 96 we have used panel data to estimate the model and have calculated income own price and cross price elasticities for eight groups of goods and services and in the second stage for 11 sub groups of staple food products we estimated those elasticities for the whole sample of consumers and for two income groups

an exchange market pressure measure for cross country analysis abstract emp measures in the existing literature are oriented towards applications in crisis dating and prediction we propose a modified emp measure where cross country comparisons are possible this is the sum of the observed change in the exchange rate with an estimated counterfactual of the magnitude of the change in the exchange rate associated with the observed currency intervention we construct a multi country dataset for emp in each month this opens up many new research possibilities

semiparametric estimation and consumer demand this paper considers the implementation of semiparametric methods in the empirical analysis of consumer demand the application is to the estimation of the engel curve relationship and uses the british family expenditure survey household composition is modelled using an extended partially linear framework this is shown to provide a useful method for pooling non parametric engel curves across households of different demographic composition c 1998 john wiley sons ltd

tricks with hicks the easi demand system we invent implicit marshallian demands which combine desirable features of hicksian and marshallian demands we propose and estimate the exact affine stone index easi implicit marshallian demand system like the almost ideal demand aid system easi budget shares are linear in parameters given real expenditures however unlike the aid easi demands can have any rank and its engel curves can have any shape over real expenditures easi error terms equal random utility parameters to account for unobserved preference heterogeneity easi demand functions can be estimated using gmm or three stage least squares and like aid an approximate easi model can be estimated by linear regression

technology capital spending and capacity utilization i introduction capacity utilization is a variable of longstanding macroeconomic interest many studies have found it to be a valuable indicator of inflationary pressure for example cecchetti 1995 finds that capacity utilization works as well as or better than other variables in predicting inflation over the next year or two similarly in models of the level of resource utilization above which inflation accelerates the utilization rate does as well as and sometimes better than the unemployment rate in predicting this level 1 this predictive value may reflect capacity utilization s ability to do double duty picking up the extent of slack in both labor and product markets corrado and mattey 1997 however in recent years the capacity utilization and unemployment rates have at times provided different signals about the degree of tightness in resource markets notably in the late 1990s the decline in the unemployment rate below 4 suggested a relatively tight labor market but the capacity utilization rate remained unexpectedly flat figure 1 part of this divergence may be due to effects of technology on capacity utilization as the 1990s saw both an investment boom that broadly increased manufacturing capacity and a shift in the composition of capacity toward high tech machinery and equipment in the 1940s and 1950s manufacturing methods typically involved assembly line production with large scale fixed units of machinery and equipment figure 1 omitted relationships between inputs and outputs were relatively fixed and adjustments in capacity were both costly and slow modern manufacturing methods however build considerable flexibility into the management of capacity technologies like numerically controlled machines programmable controllers and modular assembly make it easier to adjust the level and composition of output at the same time the use of automated design and modular tooling lowers the cost and time needed to expand capacity while the use of advanced technologies is far from universal it is increasingly widespread for example about three quarters of plants in equipment producing industries used at least one advanced technology in 1993 about 30 used five or more 2 with the investment boom that took place in the second part of the 1990s these shares are likely higher now conceptually how these advances in technology would affect capacity utilization is not clear a priori on the one hand flexible manufacturing makes it easier to ramp production up and down this may encourage firms to install a broader margin of excess capacity that is to operate at lower average utilization in order to be able to handle upswings in demand such a strategy would be favored by declining prices of high tech capital which make excess capacity cheap on the other hand automated design and modular tooling make it faster and cheaper for firms to expand capacity this may permit them to reduce the amount of excess capacity they maintain and to operate at higher utilization on average with these two offsetting forces at work determining how advances in technology affect capacity utilization at industry levels is ultimately an empirical question this paper investigates the relationship between capacity utilization and high tech investment for u s manufacturing the next section discusses conceptual considerations in the relationship between technological change capital spending and capacity utilization we show how technological change may lead either to lower average utilization by making it cheaper to hold excess capacity or to higher utilization by making further changes in capacity less costly and time consuming the third section discusses the data and specification used for our study the extent of investment in high tech machinery and equipment has varied importantly across industries and over time thus we use data on 111 manufacturing industries from 1974 to 2000 and panel data techniques to investigate effects of technology on utilization

international income inequality measuring ppp bias by estimating engel curves for food there are large differences between rich and poor people in the world this is of major concern to economists as well as to policy makers the magnitude of the dif ferences however depends on the measure used for comparisons to illustrate per capita income in china is more than five times larger if one uses penn world table pwt 1 incomes rather than exchange rate based ex incomes in this paper we study pwt incomes which aim at correcting for price level dif ferences across countries and identify the bias in them by estimating engel curves for food furthermore we study the relationship between the bias and the income of a country the pwt produces purchasing power parity ppp adjusted incomes and thus the associated bias is referred to as the ppp bias having estimated the bias in pwt incomes we provide new estimates of real income and refer to these as the engel curve ec incomes by comparing the estimated ec incomes and the pwt incomes the issue of how the bias influences estimated inequality is discussed finally we discuss whether ex incomes which simply transform each country s nominal income into one common currency provide better estimates of income than do pwt incomes this paper reports three main findings first there is substantial and systematic ppp bias in the pwt incomes the poorer the country the more its income tends to be overestimated 2 second the ppp bias causes a substantial and robust underesti mation of international inequality the gini index increases substantially when one adjusts for the bias third whereas pwt incomes provide better estimates than the ex incomes for the richer countries the ex incomes which implicitly assume that ppp holds provide better estimates for the poorer countries as we know that price levels differ across countries there is consensus that the seminal work on establishing the pwt was a well founded initiative and the data have been extensively used 3 still although many studies rely on pwt data few focus on the ppp bias in this dataset some contributors focus on one component of the bias however the so called substitution bias and use macro data to measure this

threshold cointegration between inflation and us capacity utilization abstractan analogue to the phillips curve shows a positive relationship between inflation and capacity utilization some recent empirical work has shown that this relationship has broken down when using data after the mid 1980s we empirically investigate this issue using several threshold error correction models we find in the long run a 1 increase in the rate of inflation leads to approximately a 0 0046 increase in capacity utilization the asymmetric error correction structure shows that changes in capacity utilization show significant corrective measures only during booms while changes in inflation correct during both phases of the business cycle with the corrections being stronger during recessions we also find that in the short run changes in the inflation rate do granger cause capacity utilization while changes in capacity utilization do not granger cause inflation the granger causality from inflation to capacity utilization can be interpreted as supporting recent calls made in the popular

on measuring child costs with applications to poor countries the theoretical basis for measuring child costs is discussed and detailed consideration is given to two straightforward procedures for calculation engel s food share method and rothbarth s adult good method each of these methods embodies different definitions of child costs so that the same empirical evidence can generate quite different estimates depending on the method used it is shown that true costs are generally overstated by engel s method and understated by rothbarth s procedure although the latter unlike the former can provide a sensible starting point for cost measurement our estimates from sri lankan and indonesian data suggest that children cost their parents about 30 40 percent of what they spend on themselves

estimating the value and distributional effects of free state schooling the effects of free of charge state education on income distribution are often studied by allocating government education outlays to households assuming that these outlays equal the benefit which households attach to state schooling this paper proposes a demand analysis approach to estimating the true value of state education as perceived by consumers and uses the results to assess the inefficiency of public provision empirical analysis based on data from cyprus suggests that state schooling costs twice the amount households are willing to pay for the implications of this finding for the equality and anti poverty effects of state education are illustrated

information decisions and productivity on board computers and capacity utilization in trucking productivity reflects not only how efficiently inputs are transformed into outputs but also how well information is applied to resource allocation decisions this paper examines how information technology has affected capacity utilization in the trucking industry estimates for 1997 indicate that advanced on board computers obcs have increased capacity utilization among adopting trucks by 13 percent these increases are higher than for 1992 suggesting lags in the returns to adoption and are highly skewed across hauls the 1997 estimates imply that obcs have enabled 3 percent higher capacity utilization in the industry which translates to billions of dollars of annual benefits jel d24 l92 o33 o47

carbon tax simulations using a household demand model abstract the main objective of this paper is to analyse consumer response and welfare effects due to changes in energy or environmental policy to achieve this objective we formulate and estimate an econometric model for non durable consumer demand in sweden that utilises micro and macro data in the simulations we consider two revenue neutral scenarios that both imply a doubling of the co2 tax one that returns the revenues in the form of a lower vat and one that subsidise public transport one conclusion from the simulations is that the co2 tax has regional distribution effects in the sense that household living in sparsely populated areas carry a larger share of the tax burden

the impacts of china s household consumption expenditure patterns on energy demand and carbon emissions towards 2050 abstract this paper explores how china s household consumption patterns over the period 2005 2050 influence the total energy demand and carbon dioxide co2 emissions in two baseline scenarios and how it influences carbon prices as well as the economic cost in the corresponding carbon mitigation scenarios to this end we first put forward two possible household consumption expenditure patterns up to 2050 using the working leser model taking into account total expenditure increase and urbanization for comparison both expenditure patterns are then incorporated in a hybrid recursive dynamic computable general equilibrium model the results reveal that as income level increases in the coming decades the direct and indirect household energy requirements and co2 emissions would rise drastically when household expenditure shifts from material products and transport to service oriented goods around 21 000 mtce 1 of primary energy and 45 billion tons of co2 emissions would be saved over the 45 year period from 2005 to 2050 moreover carbon prices in the dematerialized mitigation scenario would fall by 13 in 2050 thus reducing the economic cost

an investigation of the increasing prevalence of nonpurchase of meat by british households the purpose of the analysis has been to investigate the determinants of the household s decisions regarding the purchase of meat in great britain the approach using a box cox generalization of the double hurdle model has depicted the household making two choices namely whether or not to purchase the product the participation decision and then for those households which do purchase how much to buy the expenditure decision the determinants considered are socioeconomic variables such as the total expenditure of the household market prices characteristics of the householder age gender education type of employment and characteristics of the household location presence of children etc by conducting the analysis over several years of survey data 1975 1993 it is possible to investigate whether the influence of these variables has changed over time the bulk of the empirical analysis has concerned single adult households with or without children

new estimates of the elasticity of marginal utility for the uk this paper provides novel empirical evidence on the value of the elasticity of marginal utility eta for the united kingdom eta is a crucial component of the social discount rate sdr which determines the inter temporal trade offs that are acceptable to society using contemporaneous and historical data new estimates are obtained using four revealed preference techniques the equal sacrifice income tax approach the euler equation approach the frisch additive preferences approach and risk aversion in insurance markets a meta analysis indicates parameter homogeneity across approaches and a central estimate of 1 5 for eta the confidence interval excludes unity the value used in official guidance by the uk government the term structure of the sdr is then estimated the result is a short run sdr of 4 5 declining to 4 2 in the very long run this is higher and flatter than the uk official guidance the difference stems from incorrect calibration of social welfare and estimation of the diffusion of growth other things equal the results suggest that current uk guidance might need to be updated

estimating consumption economies of scale adult equivalence scales and household bargaining power how much income would a woman living alone require to attain the same standard of living that she would have if she were married what percentage of a married couple s expenditures are controlled by the husband how much money does a couple save on consumption goods by living together versus living apart we propose and estimate a collective model of household behaviour that permits identification and estimation of concepts such as these we model households in terms of the utility functions of its members a bargaining or social welfare function and a consumption technology function we demonstrate generic non parametric identification of the model and hence of a version of adult equivalence scales that we call indifference scales as well as consumption economies of scale the household s resource sharing rule or members bargaining power and other related concepts copyright 2013 oxford university press

best nonparametric bounds on demand responses this paper uses revealed preference inequalities to provide the tightest possible best nonparametric bounds on predicted consumer responses to price changes using consumer level data over a finite set of relative price changes these responses are allowed to vary nonparametrically across the income distribution this is achieved by combining the theory of revealed preference with the semiparametric estimation of consumer expansion paths engel curves we label these expansion path based bounds on demand responses as e bounds deviations from revealed preference restrictions are measured by preference perturbations which are shown to usefully characterize taste change and to provide a stochastic environment within which violations of revealed preference inequalities can be assessed

consumer behaviour theory and empirical evidence a survey this survey is designed to emphasize the relationship between empirical a nd theoretical considerations in the analysis of consumer behavior a lthough it focuses primarily on analysis at the individual or micro l evel it tries where possible to draw implications for the estimati on of aggregate relationships the importance of micro level analysis stems from the rapid expansion in available panel and survey data se ts this development has generated its own theoretical and empirical issues many of which are raised in this survey copyright 1988 by royal economic society

the contributions of angus deaton angus deaton was awarded the 2015 sveriges riksbank prize in economic sciences in memory of alfred nobel for his analysis of consumption poverty and welfare this article reviews his contributions to economics

latent separability grouping goods without weak separability this paper develops a new concept of separability with overlapping groups latent separability this is shown to provide a useful empirical and theoretical framework for investigating the grouping of goods and prices it is a generalization of weak separability in which goods are allowed to enter more than one group and where the composition of groups is identified by the choice of group specific exclusive goods latent separability is shown to be equivalent to weak separability in latent rather than purchased goods and provides a relationship between separability and household production theory for the popular class of linear almost ideal and translog demand models and their generalizations we provide a method for choosing the number of homothetic separable groups a detailed method for exploring the composition of the separable groups is also presented these methods are applied to a long time series of british individual household data on the consumption of twenty two nondurable and service goods

how revealing is revealed preference this lecture address the following two key criticisms of the empirical application of revealed preference theory when the rp conditions do not reject they do not provide precise predictions and when they do reject they do not help characterize the nature of irrationality or the degree direction of changing tastes recent developments in the application of rp theory are shown to have rendered these criticisms unfounded a powerful test of rationality is available that also provides a natural characterization of changing tastes tight bounds on demand responses and on the welfare costs of relative price and tax changes are also available and are shown to work well in practice

a system of demand equations satisfying effectively global regularity conditions a parametric specification of an indirect utility function in terms oaf expenditure and two unit cost functions is proposed specification of these unit cost functions in terms of regular functions leads to the notion of an effectively globally regular system of demand equations that is a system of demand equations that is regular over a cone in expenditure price space and for which the regular region includes all points in any given sample and all values of nominal expenditure and prices generating higher values of real expenditure than the sample minimum this general model nests a number of popular demand systems such as the linear expenditure system as special cases an empirical application illustrates some of these ideas copyright 1996 by mit press

estimating engel curves under unit and item nonresponse summary this paper estimates food engel curves using data from the first wave of the survey on health aging and retirement in europe share our statistical model simultaneously takes into account selectivity due to unit and item nonresponse endogeneity problems and issues related to flexible specification of the relationship of interest we estimate both parametric and semiparametric specifications of the model the parametric specification assumes that the unobservables in the model follow a multivariate gaussian distribution while the semiparametric specification avoids distributional assumptions about the unobservables copyright 2011 john wiley sons ltd

spending on alcohol evidence from the family expenditure survey 1970 1983 this paper reports on the investigation of a model of the determination of the share of household expenditure on alcohol using fes data for the united kingdom 1970 83 i e a time series of cross sections the authors pay special attention to the occurrence of zero expenditure variations in characteristics across the population and the modeling and interpretation of the stochastic term this term is modeled using the gamma distribution replacing the normal in tobit estimated parameters indicate strong positive skewness interactions between household characteristics and expenditure propensities are important copyright 1990 by royal economic society

an econometric analysis of demand for food quantity and quality in urban china this article offers an analytical framework for studying consumer demand for food quality based on a theory consistent demand model namely the exact affine stone index specification importantly it accounts for unobserved consumer and regional heterogeneity and allows for arbitrary engel curves the empirical value of our framework is illustrated in an econometric analysis of demand for food quality in china evaluating possible structural changes in consumer food expenditures in china is of paramount importance given the ever increasing global role of china and the implications of the structural food preference changes for the global food system the major findings emerging from this study indicate that income is an important determinant of demand for food quality and quantity with the relatively more affluent provinces having a higher affinity for food quality

nonparametric engel curves and revealed preference this paper applies revealed preference theory to the nonparametric statistical analysis of consumer demand knowledge of expansion paths is shown to improve the power of nonparametric tests of revealed preference the tightest bounds on indifference surfaces and welfare measures are derived using an algorithm for which revealed preference conditions are shown to guarantee convergence nonparametric engel curves are used to estimate expansion paths and provide a stochastic structure within which to examine the consistency of household level data and revealed preference theory an application is made to a long time series of repeated cross sections from the family expenditure survey for britain the consistency of these data with revealed preference theory is examined for periods of consistency with revealed preference tight bounds are placed on true cost of living indices

sharing rule identification for general collective consumption models we propose a method to identify bounds i e set identi cation on the shar ing rule for a general collective household consumption model unlike the eects of distribution factors it is well known that the level of the sharing rule cannot be uniquely identi ed without strong assumptions on preferences across households of dierent compositions our new results show that though not point identi ed without these assumptions narrow bounds on the sharing rule can be obtained we get these bounds by applying revealed preference restrictions implied by the collective model to the household s continuous aggregate demand functions we obtain informative bounds even if nothing is known about whether each good is public private or assignable within the household though having such infor mation tightens the bounds we apply our method to us 1999 2009 psid data this application obtains tight sharing rule bounds that yield useful conclusions regarding the eects of income and wages on intrahousehold resource sharing and on the prevalence of individual as opposed to household level poverty

a structural model of the analysis of retail market power the case of fluid milk we derive a structural model of firm behavior that is composed of the generalized quadratic almost ideal demand system to represent both consumers milk preferences and firm profit maximization conditions that allow for a range of competitive scenarios the importance of this specification is found in its fuller representation of consumer preferences as opposed to the linear approximate almost ideal demand system used in previous analyses we apply this structural framework to investigate retailer conduct in the sale of beverage milk in a u s market using product level data our lerner index estimates show that retailers are not perfectly competitive however this deviation is small copyright 2012 oxford university press

tax reform and welfare measurement do we need demand system estimation the exact measurement of the welfare costs of tax and price reform requires a detailed knowledge of individual preferences typically first order approximations of welfare costs are calculated avoiding detailed knowledge of substitution effects the authors derive second order approximations which unlike first order approximations require knowledge of the distribution of substitution elasticities this paper asks to what extent simple approximations can be used to measure the welfare costs of tax reform and evaluates the magnitude of the biases for a plausible size tax reform in the authors empirical examples first order approximations display systematic biases second order approximations always work well

the effects of male and female labor supply on commodity demands we examine the effects of male and female labor supply on household demands and present a simple and robust test for the separability of commodity demands from labor supply using data on individual households from six years of the uk fes we estimate a demand system for seven goods which includes hours and participation dummies as conditioning variables allowance is made for the possible endogeneity of these conditioning labor supply variables we find that separability is rejected furthermore we present evidence that ignoring the effects of labor supply leads to bias in the parameter estimates

analysis of food demand in vietnam and short term impacts of market shocks on quantity and calorie consumption a complete demand system for vietnam was estimated using household survey data results showed that demand for rice with respect to prices and expenditure is relatively inelastic compared to other foods demand for food in general tends to be less elastic at higher levels of income and for urban households in the short term a market shock such as a 10 decrease in income or a 30 increase in rice prices forces households to spend a larger portion of their expenditure on rice at the expense of other foods low income households face a higher risk of undernourishment as their daily calorie intake is more negatively affected by the shocks than high income households the results suggest the importance of policies that provide necessary safety net programs for the poor

economic well being and poverty among the elderly an analysis based on a collective consumption model we apply the collective consumption model of browning chiappori and lewbel 2006 to analyse economic well being and poverty among the elderly the model focuses on individual preferences a consumption technology that captures the economies of scale of living in a couple and a sharing rule that governs the intra household allocation of resources the model is applied to a time series of dutch consumption expenditure surveys our empirical results indicate substantial economies of scale and a wife s share that is increasing in total expenditures we further calculated poverty rates by means of the collective consumption model collective poverty rates of widows and widowers turn out to be slightly lower than traditional ones based on a standard equivalence scale poverty among women men in elderly couples however seems to be heavily underestimated overestimated by the traditional approach finally we analysed the impact of becoming a widow er based on cross sectional evidence we nd that the drop increase in material well being following the husband s death is substantial for women in high low expenditure couples for men the picture is reversed

machine replacement and the business cycle lumps and bumps this paper explores investment fluctuations due to discrete changes in a plant s capital stock the resulting aggregate investment dynamics are surprisingly rich reflecting the interaction between a replacement cycle the cross sectional distribution of the age of the capital stock and an aggregate shock using plant level data lumpy investment is procyclical and more likely for older capital further the predicted path of aggregate investment that neglects vintage effects tracks actual aggregate investment reasonably well however ignoring fluctuations in the cross sectional distribution of investment vintages can yield predictable nontrivial errors in forecasting changes in aggregate investment

capacity utilization revisited software control and the growth of large technical systems this paper explains how a class of it intensive capital goods called control systems are used to co ordinate the flow of goods traffic materials funds services or information through complex supply production or distribution systems the paper examines how they increase productivity by improving the utilization of installed capacity creating economies of system that are distinct from the traditional economies of scale speed and scope the paper explains which sectors they are important in and how innovation in control technologies relates to architectural changes in large technical systems it is illustrated by case studies of four very different sectors elevators retailing telecommunications and investment banking while control systems improve efficiency and enable product innovation they also create reliability problems and can alter the social distribution of risk

an alternative demand indicator the non accelerating inflation rate of capacity utilization this article examines the usefulness of the naircu the non accelerating inflation rate of capacity utilization as a demand indicator of inflation for eight european countries so far the naircu has been estimated for the usa only where it serves as a useful indicator for inflation in most european countries deviations from the equilibrium level of capacity utilization influence inflation significantly further the results not only indicate that in more recent periods the naircu has shifted upward indicating higher efficiency of the production process but also that confidence intervals have increased over time reducing the usefulness of the naircu somewhat

consumer welfare and climate change in greenland abstract this manuscript aims to assess the potential impact of climate change on consumer welfare in greenland an arctic economy that has been historically affected by climate variation three proxies for climate change i annual mass change anomaly of the ice cap ii annual temperature anomalies and iii annual heating degree days anomalies are used to test the hypothesis that climate is a potential determinant of consumer expenditure the quadratic almost ideal demand system in its original specification is used to test this hypothesis the empirical analysis supported by granger causality tests shows that the annual mass change anomaly of the ice cap is a statistically and economically significant determinant of consumption of non durable goods in greenland a counterfactual analysis predicts that climate change could have decreased the wealth of consumers with an aggregate cumulative social welfare loss of 2010 us 21 63 million between 2003 and 2017

what do we learn about consumer demand patterns from micro data the aim of this paper is to assess the importance of using micro level data in the econometric analysis of consumer demand to do this we utilize a time series of repeated cross sections covering some 4 000 households in each of 15 years employing a number of different aggregation procedures we conclude that aggregate data alone are unlikely to produce reliable estimates of structural price and income coefficients however once certain aggregation factors as well as trend and seasonal components are included an aggregate model is not necessarily outperformed across all demand equations in terms of forecasting ability jel d12 c52 c31 the purpose of this paper is to develop a complete consumer demand system based on a time series of individual household data and to use it to measure the biases introduced into the study of consumer de mand behavior when aggregate data are used in place of the appropriate microeco nomic data we assess the suitability of ag gregate data through the impact on income and price elasticities and by evaluating the ability of both micro and aggregate based models to forecast aggregate consumer de mand the biases introduced by the use of aggregate data depend upon the way that household characteristics interact with in come and price effects and on departures of demand systems from linearity we explore the structure of microeconomic demand sys tems and the role of household characteris tics in the behavior of consumer demand both for the light this may shed on the pattern of future demands and for the im plications this behavior has for issues of aggregation consumer demand patterns typically found in micro data sets vary considerably across households with different household characteristics and with different levels of income we model this variability by making intercept and slope parameters in the budget share equations of our demand sys tem depend on household characteristics and by allowing for nonlinear total log expenditure terms in fact in theory consistent demand systems it is total ex penditure rather than disposable income that is allocated across goods we find that this general framework leads to a well specified data coherent demand system which is a quadratic extension of the popu lar almost ideal model of angus s deaton and john muellbauer 1980 the micro level estimates are shown to be sensitive to the treatment of endogeneity of total expen diture and to the specification of interaction terms with household characteristics in ad dition this specification is also shown to possess many attractive features for the evaluation of aggregate models

preference heterogeneity and the rank of demand systems this article examines the effect of preference heterogeneity on nonparametric and parametric tests of the rank of demand systems using samples of households drawn from the u k family expenditure survey we find that preference heterogeneity increases the rank of demand systems when the effects of household characteristics on demand are removed by semiparametric techniques a rank 3 demand system appears to be an adequate empirical specification for all samples

quadratic engel curves and consumer demand this paper presents a model of consumer demand that is consistent with the observed expenditure patterns of individual consumers in a long time series of expenditure surveys and is also able to provide a detailed welfare analysis of shifts in relative prices a nonparametric analysis of consumer expenditure patterns suggests that engel curves require quadratic terms in the logarithm of expenditure while popular models of demand such as the translog or the almost ideal demand systems do allow flexible price responses within a theoretically coherent structure they have expenditure share engel curves that are linear in the logarithm of total expenditure we derive the complete class of integrable quadratic logarithmic expenditure share systems a specification from this class is estimated on a large pooled data set of u k households models that fail to account for engel curvature are found ro generate important distortions in the patterns of welfare losses associated with a tax increase