Working Paper No. 1324

Income Elasticities Without Parameters

Published: March 17, 2020Pages: 14Keywords: Income elasticity; Non-parametric; Revealed preference; SSARPJEL-codes: D11; D12

Income Elasticities Without Parameters Per Hjertstrand


This paper proposes a simple non-parametric framework to calculate income elasticities from a data set of observed prices and consumed quantities without having to estimate any parameters. The framework can be applied when the price-quantity data satisfies a revealed preference axiom called the strong version of the strong axiom of revealed preference (SSARP). The framework is used to calculate income elasticities for food and non-alcoholic drinks from a rich panel of household expenditures. For this category, it is found that households are rather homogeneous in their demand responses.


Reference:

Hjertstrand, Per (2020), "Income Elasticities Without Parameters". IFN Working Paper No. 1324. Stockholm: Research Institute of Industrial Economics.

Per Hjertstrand

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