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Gorman Revisited: Nonparametric Conditions for Exact Linear Aggregation

Laurens Cherchye, Ian Crawford, Bram De Rock and Frederic Vermeulen

Working Papers ECARES from ULB -- Universite Libre de Bruxelles

Abstract: In the tradition of Afriat (1967), Diewert (1973) and Varian (1982), we provide arevealed preference characterisation of exact linear aggregation. This guarantees thataggregate demand can be written as a function of prices and aggregate income alone,while abstracting from income-distributional aspects. We also establish nonparametricconditions for individual consumption to be representable in terms of Gorman PolarForm preferences. Our results are simple and complement those of Gorman (1953,1961). We illustrate the practical usefulness of our results by means of an empiricalapplication to a Spanish balanced microdata panel.

Pages: 22 p.
Date: 2015-11
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