The Rank of Demand Systems: Theory and Nonparametric Estimation

Arthur Lewbel

Econometrica, 1991, vol. 59, issue 3, 711-30

Abstract: W. M. Gorman's (1981) concept of Engel curve "rank" is extended to apply to any demand system. Rank is shown to have implications for specification, separability, and aggregation of demands. A simple nonparametric test of rank using Engel curve data is described and applied to U.S. and U.K. consumer survey data. The test employs a new general method for testing the rank of estimated matrices. The results are used to assess theoretical and empirical aggregation error in representative consumer models, and to explain a representative consumer paradox. Copyright 1991 by The Econometric Society.

Date: 1991
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