Stochastic Hicksian Aggregation with an Application to Grouping Goods without Separable Utility

Arthur Lewbel

Annals of Economics and Statistics, 1993, issue 29, 17-42

Abstract: The concept of stochastic Hicksian aggregation is introduced to eliminate the bias associated with aggregating imperfectly correlated variables. This paper describes stochastic Hicksian aggregation, and uses it to estimate demands for groups of goods without assuming separable utility. Separability is a restrictive behavioral assumption that is difficult to test powerfully. In contrast, Stochastic Hicksian aggregation is easily testable without reference to any demand system, and essentially requires only the commonly observed property that within group prices be highly correlated.

Date: 1993
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Persistent link: https://EconPapers.repec.org/RePEc:adr:anecst:y:1993:i:29:p:17-42

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