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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Interdisciplinary European Studies

The European Union and the Return of the Nation State


This book explores the complex and ever-changing relationship between the European Union and its member states. The recent surge in tension in this relationship has been prompted by the actions of some member state governments as they question fundamental EU values and principles and refuse to implement common decisions seemingly on the basis of narrowly defined national interests.

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