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.
Find the working paper here.
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
Journal article details
- Publisher
- Wiley
- Issue
- November 2008
Suggested citation
R, Blundell and M, Browning and I, Crawford. (2008). 'Best nonparametric bounds on demand responses' (2008)
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