Globalization and Consumption Patterns Among the OECD Countries

Abstract

The paper examines the evolution of consumption patterns in Organization for Economic Co-operation and Development (OECD) countries from 1985 to 1999. Estimation of demand function parameters uncovered consistent evidence that differences in consumption patterns have recently diminished between the countries. The paper further uncovers an empirical relationship that indicates that increased bilateral trade and foreign direct investment (FDI) has contributed to the convergence of consumption patterns. The result is robust to the consideration of endogeneity in the trade and FDI variables.

Keywords: Globalization, almost ideal demand system, endogeneity, convergence

JEL Classification: C33, D12, F02