Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1324: Income Elasticities Without Parameters

Per Hjertstrand ()
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Per Hjertstrand: Research Institute of Industrial Economics (IFN), Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden

Abstract: 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.

Keywords: Income elasticity; Non-parametric; Revealed preference; SSARP

JEL-codes: D11; D12

14 pages, March 17, 2020

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