Homothetic Efficiency: Theory and Applications

Reprint No. 2019:17

Author(s): Jan Heufer and Per HjertstrandYear: 2019 Title: Journal of Business & Economic Statistics Volume (No.): 37 (2) Pages: 235–247

Homothetic Efficiency: Theory and Applications Jan Heufer and Per Hjertstrand

We provide a nonparametric revealed preference approach to demand analysis based on homothetic efficiency. Homotheticity is widely assumed (often implicitly) because it is a convenient and often useful restriction. However, this assumption is rarely tested, and data rarely satisfy testable conditions. To overcome this, we provide a way to estimate homothetic efficiency of consumption choices. The method provides considerably higher discriminatory power against random behavior than the commonly used Afriat efficiency. We use experimental and household survey data to illustrate how our approach is useful for different empirical applications and can provide greater predictive success.

Heufer, Jan and Per Hjertstrand (2019), "Homothetic Efficiency: Theory and Applications". Journal of Business & Economic Statistics 37(2), 235–247.

Per Hjertstrand


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Global index of the sharing economy

Timbro SEI

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Andreas Bergh, IFN and Lund University, is one of the authors of this book. The Timbro Sharing Economy Index is the first global index of the sharing economy. The index has been compiled using traffic volume data and scraped data, and provides a unique insight into the driving factors behind the peer-to-peer economy.

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