This paper uses revealed preference inequalities to provide tight nonparametric bounds on consumer responses to price changes. Price responses are allowed to vary nonparametrically across the income distribution by exploiting microdata on consumer expenditures and incomes over a finite set of discrete relative price changes. This is achieved by combining the theory of revealed preference with the semiparametric estimation of consumer expansion paths (Engel curves). We label these expansion path based bounds as E-bounds. Deviations from revealed preference restrictions aremeasured by preference perturbations which are shown to usefully characterise taste change.
Authors
CPP Co-Director
Richard is Co-Director of the Centre for the Microeconomic Analysis of Public Policy (CPP) and Senior Research Fellow at IFS.
Research Associate University of Copenhagen
Martin is an IFS Research Associate, a Nuffield Senior Research Fellow and a Professor of Economics at the University of Oxford.
Ian Crawford
Working Paper details
- DOI
- 10.1920/wp.ifs.2005.0520
- Publisher
- IFS
Suggested citation
R, Blundell and M, Browning and I, Crawford. (2005). Best nonparametric bounds on demand responses. London: IFS. Available at: https://ifs.org.uk/publications/best-nonparametric-bounds-demand-responses (accessed: 19 April 2024).
Related documents
More from IFS
Understand this issue
Sure Start achieved its aims, then we threw it away
15 April 2024
Social mobility and wealth
12 December 2023
How important is the Bank of Mum and Dad?
15 December 2023
Policy analysis
Living standards since the last election
21 March 2024
Major challenges for education in Wales
21 March 2024
Sliding education results and high inequalities should prompt big rethink in Welsh education policy
21 March 2024
Academic research
Understanding Society: minimising selection biases in data collection using mobile apps
2 February 2024
Labour market inequality and the changing life cycle profile of male and female wages
15 April 2024
There and back again: women’s marginal commuting costs
2 April 2024