Giffen Behavior: Theory and Evidence

60 Pages Posted: 9 Jul 2007 Last revised: 9 Sep 2022

See all articles by Robert T. Jensen

Robert T. Jensen

UCLA School of Public Affairs; National Bureau of Economic Research (NBER)

Nolan H. Miller

University of Illinois at Urbana-Champaign

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Date Written: July 2007

Abstract

This paper provides the first real-world evidence of Giffen behavior, i.e., upward sloping demand. Subsidizing the prices of dietary staples for extremely poor households in two provinces of China, we find strong evidence of Giffen behavior for rice in Hunan, and weaker evidence for wheat in Gansu. The data provide new insight into the consumption behavior of the poor, who act as though maximizing utility subject to subsistence concerns, with both demand and calorie elasticities depending significantly, and non-linearly, on the severity of their poverty. Understanding this heterogeneity is important for the effective design of welfare programs for the poor.

Suggested Citation

Jensen, Robert T. and Miller, Nolan, Giffen Behavior: Theory and Evidence (July 2007). NBER Working Paper No. w13243, Available at SSRN: https://ssrn.com/abstract=999038

Robert T. Jensen (Contact Author)

UCLA School of Public Affairs ( email )

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Nolan Miller

University of Illinois at Urbana-Champaign ( email )

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HOME PAGE: http://www.business.illinois.edu/nmiller

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