The Consumer Consumption Conundrum: An Explanation

JOURNAL OF MONEY, CREDIT, AND BANKING, Vol 29 No 2, May 1997

Posted: 18 Feb 1997

See all articles by Adrian R. Fleissig

Adrian R. Fleissig

California State University, Fullerton - Department of Economics

Abstract

This paper uses the Fourier flexible form to jointly approximate utility and service flows from durable and nondurable goods. In contrast, parametric functions are usually not flexible enough to accurately approximate nonseparability and often give inconsistent results. This paper calls these inconsistent results the consumer consumption conundrum. I calculate Morishima elasticities of substitution because Blackorby and Russell (1989) show that the Allen-Uzawa measure of substitution is incorrect. Results show that substitution into commodities are variable over time. Therefore, policy intended to affect consumption should take the variability of substitution into account because constant elasticity of substitution functions may give misleading conclusions.

JEL Classification: C14, C30, E21

Suggested Citation

Fleissig, Adrian R., The Consumer Consumption Conundrum: An Explanation. JOURNAL OF MONEY, CREDIT, AND BANKING, Vol 29 No 2, May 1997. Available at SSRN: https://ssrn.com/abstract=4652

Adrian R. Fleissig (Contact Author)

California State University, Fullerton - Department of Economics ( email )

Fullerton, CA 92834
United States

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