Do demographics prevent consumer aggregates from reflecting micro-level preferences?

Christos Koulovatianos, Carsten Schröder and Ulrich Schmidt

No 484, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: Most simulated micro-founded macro models use solely consumer-demand aggregates in order to estimate deep economy-wide preference parameters, which are useful for policy evaluation. The underlying demand-aggregation properties that this approach requires, should be easy to empirically disprove: since household-consumption choices differ for households with more members, aggregation can be rejected if appropriate data violate an affine equation regarding how much individuals benefit from within-household sharing of goods. We develop a survey method that tests the validity of this equation, without utility-estimation restrictions via models. Surprisingly, in six countries, this equation is not rejected, lending support to using consumer-demand aggregates.

Keywords: Linear Aggregation; Dynamic Representative Consumer; Household-Size Economies; Equivalent Incomes; Survey Method (search for similar items in EconPapers)
JEL-codes: C42 D11 D12 D31 D91 E01 E21 I32 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-mac and nep-upt
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:484

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