This paper sets out to explore theoretically how a change in the distribution of disposable income affects the market demand for a good or service. With the help of only minimal information on the shape of the Engel curve and the transition from one distribution to the other, a variety of empirically relevant constellations are identified in which the size (or mean income) effect on market demand is counteracted by the distributional effect. Since the determining factors are expressed by relations between summary statistics, our results at the same time provide theoretically sound restrictions on econometric approaches to market demand analysis.
Authors
Peter Lambert,
Pfahler Pfahler
Working Paper details
- DOI
- 10.1920/wp.ifs.1993.9317
- Publisher
- IFS
Suggested citation
Lambert,, P and Pfahler, P. (1993). Market demand and income distribution: a theoretical exploration. London: IFS. Available at: https://ifs.org.uk/publications/market-demand-and-income-distribution-theoretical-exploration (accessed: 26 April 2024).
More from IFS
Understand this issue
Sure Start achieved its aims, then we threw it away
15 April 2024
If you can’t see it, you can’t be it: role models influence female junior doctors’ choice of medical specialty
24 April 2024
The £600 billion problem awaiting the next government
25 April 2024
Policy analysis
Recent trends in public sector pay
26 March 2024
Recent trends in and the outlook for health-related benefits
19 April 2024
4.2 million working-age people now claiming health-related benefits, could rise by 30% by the end of the decade
19 April 2024
Academic research
Labour market inequality and the changing life cycle profile of male and female wages
15 April 2024
Interpreting cohort profiles of lifecycle earnings volatility
15 April 2024
Police infrastructure, police performance, and crime: Evidence from austerity cuts
24 April 2024