The Exact Insensitivity of Market Budget Shares and the 'Balancing Effect'

Gaël Giraud and Isabelle Maret

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: We reformulate Grandmont's and its successors' notion of behavioral heterogeneity such as to get the exact insensitivity of the aggregate budget share function with respect to changes in prices and income, instead of a mere approximate insensitivity. We propose a non parametric set-up such that, if the population is distributed according to some ``uniform'' probability measure, the aggregate budget share function is constant. The important contribution is that this exact insensitivity is not explained by any insensitivity at the microeconomic level but rather by an exact "balancing effect". We give illustrative examples of populations that fulfill our requirements.

Keywords: Statistical approach; aggregation of demand; behavioral heterogeneity; balancing effect; large economy; Law of Demand; insensitivity of market budget shares. (search for similar items in EconPapers)
JEL-codes: D11 D12 D30 D41 D50 E1 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (11)

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Related works:
Working Paper: The Exact Insensitivity of Market Budget Shares and the "Balancing Effect" (2007)
Working Paper: The Exact Insensitivity of Market Budget Shares and the "Balancing Effect" (2007)
Working Paper: The exact insensitivity of market budget shares and the "balancing effect" (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2005-02

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