On the Distributional Effects of Income in an Aggregate Consumption Relation

23 Pages Posted: 30 Oct 2006

See all articles by Manisha Chakrabarty

Manisha Chakrabarty

Indian Institute of Management Calcutta

Anke Schmalenbach

University of Bonn - Economic Science Area

Jeffrey Racine

Syracuse University

Abstract

In this paper we analyse the influence of characteristics of the income distribution in modelling aggregate consumption expenditure. We model the aggregate consumption relation of a heterogeneous population, using a statistical distributional approach of aggregation, and apply it to UK-Family Expenditure Survey data. A bootstrap test based on a non-parametric estimation methodology, which accounts for the presence of continuous and discrete variables, suggests that the mean and the dispersion of the income distribution significantly influence aggregate consumption expenditure. Also, the parameters of the aggregate relation are time varying. These findings have implications for constructing empirically sound models of aggregate consumption expenditure.

Suggested Citation

Chakrabarty, Manisha and Schmalenbach, Anke and Racine, Jeffrey, On the Distributional Effects of Income in an Aggregate Consumption Relation. Canadian Journal of Economics, Vol. 39, No. 4, pp. 1221-1243, November 2006. Available at SSRN: https://ssrn.com/abstract=940834 or http://dx.doi.org/10.1111/j.1540-5982.2006.00388.x

Manisha Chakrabarty (Contact Author)

Indian Institute of Management Calcutta ( email )

Joka
D.H Road
Kolkata, West Bengal 700104
India

Anke Schmalenbach

University of Bonn - Economic Science Area ( email )

Adenauerallee 24-42
D-53113 Bonn
Germany

Jeffrey Racine

Syracuse University ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States

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