The homogeneous marginal utility of income assumption

Thomas Demuynck

No 13, Research Memorandum from Maastricht University, Graduate School of Business and Economics (GSBE)

Abstract: We develop a test to verify if every agent from a population of heterogeneous consumers has the same marginal utility of income function. This homogeneous marginal utility of income assumption is often (implicitly) used in applied demand studies because it has nice aggregation properties and facilitates welfare analysis. If a dataset satisfies our test, we can further identify the common marginal utility of income function. We apply our results using a US cross sectional dataset on food consumption.

Date: 2015-01-01
New Economics Papers: this item is included in nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:unm:umagsb:2015013

DOI: 10.26481/umagsb.2015013

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