TY - JOUR
T1 - Heterogeneity in Consumer Demands and the Income Effect
T2 - Evidence from Panel Data
AU - Christensen, Mette
PY - 2014
Y1 - 2014
N2 - This paper uses unique Spanish panel data on household expenditures to test whether unobservable heterogeneity in household demands (taste, etc.) is correlated with total expenditures (income). The main finding is that tastes are indeed correlated with income for about half of the goods considered, implying that cross-sectional estimates of income elasticities for these goods are biased. The goods are the following: food eaten outside home, alcohol and tobacco, transportation, and energy. The elasticity of alcohol and tobacco is more than halved when taking unobserved heterogeneity into account. For transportation, the bias is sufficiently large to misclassify the good as a luxury.
AB - This paper uses unique Spanish panel data on household expenditures to test whether unobservable heterogeneity in household demands (taste, etc.) is correlated with total expenditures (income). The main finding is that tastes are indeed correlated with income for about half of the goods considered, implying that cross-sectional estimates of income elasticities for these goods are biased. The goods are the following: food eaten outside home, alcohol and tobacco, transportation, and energy. The elasticity of alcohol and tobacco is more than halved when taking unobserved heterogeneity into account. For transportation, the bias is sufficiently large to misclassify the good as a luxury.
KW - Engel curves
KW - Income elasticity
KW - Unobservable heterogeneity
UR - http://sfx-45cbs.hosted.exlibrisgroup.com/45cbs?url_ver=Z39.88-2004&url_ctx_fmt=info:ofi/fmt:kev:mtx:ctx&ctx_enc=info:ofi/enc:UTF-8&ctx_ver=Z39.88-2004&rfr_id=info:sid/sfxit.com:azlist&sfx.ignore_date_threshold=1&rft.object_id=954921390967&rft.object_portfolio_id=&svc.holdings=yes&svc.fulltext=yes
U2 - 10.1111/sjoe.12049
DO - 10.1111/sjoe.12049
M3 - Journal article
VL - 116
SP - 335
EP - 355
JO - Scandinavian Journal of Economics
JF - Scandinavian Journal of Economics
SN - 0347-0520
IS - 2
ER -