Aggregation Effects on Price and Expenditure Elasticities in a Quadratic Almost Ideal Demand System

Frank Denton and Dean Mountain ()

Quantitative Studies in Economics and Population Research Reports from McMaster University

Abstract: While it is well known that demand elasticities calculated at the macro level will in general differ from those calculated at the micro level because of aggregation effects there remain the questions of how large the effects are, and how they vary with the degree of nonuniformity in the income distribution. We explore those questions with models based on a quadratic version of the Almost Ideal Demand System. We investigate the elasticity differences theoretically and then calibrate the models and generate numerical results, using income data for seven countries with widely different distributions. The aggregation effects are found generally to be rather small, even with highly nonuniform income distributions.

Keywords: demand elasticities; aggregation effects; quadratic almost ideal demand system (search for similar items in EconPapers)
JEL-codes: C30 D10 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2002-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Aggregation effects on price and expenditure elasticities in a quadratic almost ideal demand system (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:mcm:qseprr:374

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