Do Demographics Prevent Consumer Aggregates from Reflecting Micro-Level Preferences?

CFS Working Paper No. 484

94 Pages Posted: 1 Nov 2014

See all articles by Christos Koulovatianos

Christos Koulovatianos

Universite du Luxembourg - Faculty of Law, Economics and Finance

Carsten Schröder

Free University of Berlin (FUB) - Department of Business and Economics

Ulrich Schmidt

University of Kiel - Institute of Economics

Date Written: September 17, 2014

Abstract

Most simulated micro-founded macro models use solely consumer-demand aggregates in order to estimate deep economy-wide preference parameters, which are useful for policy evaluation. The underlying demand-aggregation properties that this approach requires, should be easy to empirically disprove: since household-consumption choices differ for households with more members, aggregation can be rejected if appropriate data violate an affine equation regarding how much individuals benefit from within-household sharing of goods. We develop a survey method that tests the validity of this equation, without utility-estimation restrictions via models. Surprisingly, in six countries, this equation is not rejected, lending support to using consumer-demand aggregates.

Keywords: Linear Aggregation, Dynamic Representative Consumer, Household-Size Economies, Equivalent Incomes, Survey Method

JEL Classification: C42, E21, D12, E01, D11, D91, D31, I32

Suggested Citation

Koulovatianos, Christos and Schröder, Carsten and Schmidt, Ulrich, Do Demographics Prevent Consumer Aggregates from Reflecting Micro-Level Preferences? (September 17, 2014). CFS Working Paper No. 484. Available at SSRN: https://ssrn.com/abstract=2517233 or http://dx.doi.org/10.2139/ssrn.2517233

Christos Koulovatianos (Contact Author)

Universite du Luxembourg - Faculty of Law, Economics and Finance ( email )

162a, avenue de la Faïencerie
Luxembourg-Limpertsberg, L-1511
Luxembourg

Carsten Schröder

Free University of Berlin (FUB) - Department of Business and Economics ( email )

Boltzmannstrasse 20
D-14195 Berlin, 14195
Germany
+49 030 838-52259 (Phone)
+49 030 838-52560 (Fax)

Ulrich Schmidt

University of Kiel - Institute of Economics ( email )

Olshausenstrasse 40
24098 Kiel, 24098
Germany

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