Gorman Revisited: Nonparametric Conditions for Exact Linear Aggregation

18 Pages Posted: 9 Apr 2013

See all articles by L. Cherchye

L. Cherchye

KU Leuven; Erasmus Research Institute of Management (ERIM)

Ian Crawford

Institute for Fiscal Studies (IFS)

Bram De Rock

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES)

Frederic Vermeulen

Tilburg University - CentER; IZA Institute of Labor Economics

Date Written: March 26, 2013

Abstract

In the tradition of Afriat (1967), Diewert (1973) and Varian (1982), we provide a revealed preference characterisation of exact linear aggregation. This guarantees that aggregate demand can be written as a function of prices and aggregate income alone, while abstracting from income-distributional aspects. We also establish nonparametric conditions for individual consumption to be representable in terms of Gorman Polar Form preferences. Our results are simple and complement those of Gorman (1953, 1961). We illustrate the practical usefulness of our results by means of an empirical application to a Spanish balanced microdata pan.

Suggested Citation

Cherchye, Laurens and Crawford, Ian and De Rock, Bram and Vermeulen, Frederic, Gorman Revisited: Nonparametric Conditions for Exact Linear Aggregation (March 26, 2013). Available at SSRN: https://ssrn.com/abstract=2247284 or http://dx.doi.org/10.2139/ssrn.2247284

Laurens Cherchye (Contact Author)

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant
Belgium

Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Ian Crawford

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

Bram De Rock

Université Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES) ( email )

Av. F. D. Roosevelt, 50
CP 114
Brussels, B-1050
Belgium

Frederic Vermeulen

Tilburg University - CentER ( email )

P.O. Box 90153
5000 LE Tilburg
Netherlands
+31 13 466 3196 (Phone)

HOME PAGE: http://center.uvt.nl/staff/vermeulen/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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