Heterogeneity in consumer demands and the income effect: Evidence from panel data

Arbeitspapier

All micro studies of demand are based on using time series cross sectional data. Because in such data each household is only observed once, it is only under strong identifying restrictions that one can interpret the coefficients on consumer behavior. For example, if tastes are correlated with income, the usual estimates of income elasticities from cross sectional data are biased. In contrast, panel data allows identification of the coefficients on consumer behavior in the presence of unobservable correlated heterogeneity. In this paper we make use of a unique Spanish panel data set on household expenditures to test whether unobservable heterogeneity in household demands (taste) is correlated with total expenditures (income). We find that tastes are indeed correlated with income for half of the goods considered.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IFS Working Papers ; No. 07/16

Classification and Topics

• Classification: Wirtschaft ; Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models ; Consumer Economics: Empirical Analysis
• Subject: Engel curves ; unobservable heterogeneity ; panel data ; Haushaltseinkommen ; Verbraucherausgaben ; Mikroökonomische Konsumfunktion ; Panel ; Schätzung ; Spanien

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Christensen, Mette
• Event: Veröffentlichung
• (who): Institute for Fiscal Studies (IFS)
• (where): London
• (when): 2007

Further information

• DOI: doi:10.1920/wp.ifs.2007.0716
• Handle: http://hdl.handle.net/10419/71581
• Last update: 10.03.2025, 11:43 AM CET