The modern system-wide approach to applied demand analysis emphasizes a unity between theory and applications. Its firm foundations in economic theory make it one of the most successful areas of applied econometrics. "A System-Wide Analysis of International Consumption Patterns" presents a large number of applications of recent innovations in the area and uses consumption data for 18 OECD countries to provide convincing evidence, one way or the other, about the validity of consumption theory. The empirical results presented in the book have a number of uses. Reliable estimates of income and price elasticities of demand are provided for 10 commodity groups in 18 countries. A feature of these results is that a number of major empirical regularities are identified that seem to hold across different periods and different countries. The text also presents an extensive application of recently developed Monte Carlo testing procedures to test demand theory and the structure of preferences. The results so obtained are in stark contrast to most previous findings based on the conventional asymptotic tests.Other results presented in the book include: (1) differences in economic variables (prices and incomes in particular) account for observed differences in consumption patterns internationally, while differences in tastes seem to play a much smaller role. (2) Own-price elasticities are approximately proportional to the corresponding income elasticities, a result coinciding with Pigou's law. (3) The income elasticity of the marginal utility of income does not seem to depend on income, which contradicts the famous Frisch's conjecture.
1: Introduction.- 1.1 The System-Wide Approach to Consumption Economics.- 1.2 Two Examples.- 1.3 More on the Linear Expenditure System.- 1.4 Recent Innovations in the System-Wide Approach.- 1.5 International Consumption Comparisons.- 1.6 Some International Consumption Data.- 1.7 Indexes of International Consumption Data.- 1.8 Some Results from the LPW Study.- 1.9 The Rotterdam Model.- 1.10 Working’s Model.- 1.11 Working’s Model and Differential Demand Equations.- 1.12 Further Evidence on Working’s Model.- 1.13 A Demand System for the World.- 1.14 The Comparability of International Data.- 1.15 Policy Implications.- Appendix to Chapter 1.- References.- 2: Empirical Regularities in OECD Consumption.- 2.1 Introduction.- 2.2 The OECD Database.- 2.3 Budget Shares and Price and Quantity Log-changes.- 2.4 Divisia Moments.- 2.5 Relative Prices and Consumption.- 2.6 Double-Log Demand Equations.- 2.7 A Bird’s Eye View of the Elasticities.- 2.8 Is there a Relationship Between the Price and Income Elasticities?.- 2.9 The Relationship Between the Autonomous Trends and Income and Price Elasticities.- 2.10 A Nonparametric Picture of Prices and Quantities.- 2.11 More on the Nonparametric Picture.- Appendices to Chapter 2.- References.- 3: Do OECD Consumers Obey Demand Theory?.- 3.1 Introduction.- 3.2 The Demand Model.- 3.3 Demand Homogeneity.- 3.4 Slutsky Symmetry.- 3.5 Theil’s Monte Carlo Test.- 3.6 Specifying the Covariance Matrix.- 3.7 The Performance of Alternative Specifications of ?.- 3.8 Monte Carlo Testing of Homogeneity for the OECD.- 3.9 Monte Carlo Testing of Symmetry for the OECD.- 3.10 Monte Carlo Testing of Preference Independence for the OECD.- 3.11 The Implied Demand Elasticities.- 3.12 More on the Elasticities.- 3.13 Concluding Comments.- Appendices toChapter 3.- References.- 4: How Similar Are OECD Consumers?.- 4.1 Introduction.- 4.2 Model I: A Demand System for Each of the 15 Countries.- 4.3 Model II: Common Demand Parameters.- 4.4 Model III: A Formally Pooled Demand System.- 4.5 Model IV: Theil’s Cross-Country Demand System.- 4.6 Comparison of the Models.- 4.7 More on the Comparison.- 4.8 Do the Demand Parameters Depend on Income and Prices?.- 4.9 Concluding Comments.- Appendices to Chapter 4.- References.- 5:The Reliability of ML Estimators of Systems of Demand Equations.- 5.1 Introduction.- 5.2 The Estimates.- 5.3 The Simulation Procedure.- 5.4 The Simulation Results for Seven Countries with the Usual Covariance Matrix.- 5.5 The Simulation Results for Eighteen Countries with the Alternative Covariance Matrix.- 5.6 The Simulation Results for the Pooled Model.- 5.7 Concluding Comments.- Appendices to Chapter 5.- References.- 6: Further Evidence on the Frisch Conjecture.- 6.1 Introduction.- 6.2 Estimating the Income Flexibility.- 6.3 322 Estimates of the Income Flexibility.- 6.4 A Constant Income Flexibility for Each Country.- 6.5 Testing Frisch’s Conjecture.- 6.6 Comparison with Other Studies.- 6.7 Concluding Comments.- Appendices to Chapter 6.- References.
