Is Food Consumption a Good Proxy for Nondurable Consumption?

12 Pages Posted: 26 Oct 2010 Last revised: 24 Mar 2016

See all articles by Yosef Bonaparte

Yosef Bonaparte

University of Colorado at Denver - Department of Finance

Frank J. Fabozzi

EDHEC Business School

Date Written: March 8, 2015

Abstract

This paper analyses the differences between food and nondurable consumption data. Due to the lack of annual panel data on households' nondurable consumption, many empirical studies that test for the permanent income hypothesis, consumption insurance hypothesis, or to estimate the elasticity of intertemporal substitution (EIS) use panel data on food consumption (from the Panel Study of Income Dynamics- PSID) as a substitution for nondurable consumption. In this paper, our main interest is to examine whether there is a discrepancy in estimating the EIS when we use food consumption instead nondurable consumption data for households with different wealth levels. The results show that there is a discrepancy on estimating the EIS and it increases as nondurable consumption increases.

Keywords: consumption growth, food consumption, separability

JEL Classification: D91, C12

Suggested Citation

Bonaparte, Yosef and Fabozzi, Frank J., Is Food Consumption a Good Proxy for Nondurable Consumption? (March 8, 2015). Economics Letters, Vol. 111, 2011. Available at SSRN: https://ssrn.com/abstract=888745

Yosef Bonaparte (Contact Author)

University of Colorado at Denver - Department of Finance ( email )

United States

Frank J. Fabozzi

EDHEC Business School ( email )

France
215 598-8924 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
69
Abstract Views
1,283
rank
339,801
PlumX Metrics