The Propensity to Consume: I. The Objective Factors

On J. M. Keynes's 1936 Suggestion of a Keynes-Neoclassical Synthesis to Harrod and Hicks: Why It Fell on Deaf Ears

The high and rapidly rising adult obesity rates in the United States, United Kingdom, Australia and New Zealand are associated with major health risks, including cardiovascular disease, diabetes, stroke, and some forms of cancer; large health care costs; and premature deaths annually. For example, the death rate from diabetes mellitus has been rising in the U.S. In contrast, death rates from circulator diseases have a strong negative trend, but rising obesity rates almost certainly have slowed this trend. This paper focuses on obesity-related mortality from diabetes and circulatory diseases and establishes the econometric underpinning of an aggregate household health production function and an aggregate household health supply function using data for 15 high income countries, 1971-2001. Our health production function estimates show that mortality is related with a lag to diet, health care, organization of the health care system, and knowledge and technical change. Our aggregate household supply function shows that lower food prices increase and socialized medicine at a modest level decreases mortality with a lag, other things equal, including medical and dietary information and medical technology. From a policy perspective, cheap, unhealthy food is bad for human health and socialized medicine at some level is good for health.

Community preferences for deriving aggregate consumption de- mand has been used in international trade theory for many years. Authors like Samuelson [12], Gorman [5], Muellbauer [8], Milne [7], and others, have investigated the problem: under what conditions can individual preferences be aggregated so that there exists a community preference map from which an aggregate de- mand function can be derived. Eisenberg [3] has shown that if the individuals' preferences are homothetic and the distribution of income is fixed, then the aggregate demand function can be derived from a homogeneous and concave utility function. In relationship to E i s e n b e rg's results, Chipman [1] published an article demonstrating that also in terms of the integrability theory, using an approach pioneered by Samu- elson and perfected by Hurwicz and Uzawa, the aggregation of individual demand functions is possible so that the community de- mand function acts as if it were derivable from a single preference ordering. As a basic assumption, Chipman also requires that the consumers' preferences are homothetic. This paper is concerned with the aggregation of individual de- mand functions in terms of the revealed preference analysis. Based on hypotheses according to Uzawa [11], we want to show that if consumers' demand functions are linearly homogeneous in income

The functional form of the aggregate import demand equation: A comparison of three European economies

This study empirically estimates some critical parameters of the aggregate import demand function for Bangladesh for Bangladesh using quarterly time series data and by applying the Johansen–Juselius multivariate cointegration technique. Cointegration results indicate that the import demand function is dominated by income and relative prices. The income elasticity is significantly positive and exceeds unity indicating that aggregate imports are to be considered as ‘luxury’ goods. The effect of the relative price variable is significantly negative but its elasticity coefficient is less than unity.

Journal Article Mr. Wells’ Aggregate Supply Function—A Comment Get access E. C. H. Veendorp, E. C. H. Veendorp Rice University, Houston, Texas Search for other works by this author on: Oxford Academic Google Scholar H. G. Werkema H. G. Werkema Rice University, Houston, Texas Search for other works by this author on: Oxford Academic Google Scholar The Economic Journal, Volume 71, Issue 283, 1 September 1961, Pages 634–636, https://doi.org/10.2307/2228941 Published: 01 September 1961

Summary In this paper aggregate supply and demand functions for Germany’s imports and exports are estimated for the period 1975:1–1999:4. Previous studies are extended in two regards: First, the multivariate estimation technique of Johansen (1988, 1991) is employed, which helps to avoid the potential bias of the predominately used single-equation approaches. Second, structural error-correction models are estimated for the import and export market. This allows for conclusions about the short-run response of buyers and sellers in both markets to changes in their forcing variables.

Two issues that have become increasingly important while estimating the parameters of aggregate demand functions to study firm behavior are the endogeneity of marketing activities (typically, price) and heterogeneity across consumers in the market under consideration. Ignoring these issues in the estimation of the demand function parameters can lead to biased and inconsistent estimates for the effects of marketing activities. Endogeneity and heterogeneity have achieved prominence in large measure because of the increasing popularity of logit models to characterize demand functions using aggregate data. The logit model accounts for purchase incidence and brand choice by including a “no-purchase” alternative in the consumer's choice set. This allows for category sales to change as a function of the marketing activities of brands in the category.There are three issues with using the logit model with the no-purchase option to characterize demand when studying competitive interactions among firms. (1) The marketing literature dealing with brand choice behavior at the consumer level has found that the IIA restriction is not appropriate, as each brand in the choice set is more similar to some brands than it is to others. (2) Studies have found that the purchase incidence decision is distinct from the brand choice decision. Hence, it may not be appropriate to model the no-purchase decision as just another alternative in the choice set with the IIA restriction holding across all brands and the no-purchase option. (3) Even if the distinction between the purchase incidence and brand choice decisions is accounted for via, for example, a nested logit specification, accounting for the purchase incidence decision with aggregate data requires assumptions for computing the share of the no-purchase alternative which is otherwise unobserved.In this paper, we propose a probit model as an alternative to the logit model to specify the aggregate demand functions of firms competing in oligopoly markets. The probit model avoids the IIA property that affects the logit model at the individual consumer level. Furthermore, the probit model can naturally account for the distinction between the purchase incidence and brand choice decisions due to the general covariance structure assumed for the utilities of the alternatives. We demonstrate how the parameters of the proposed model can be estimated using aggregate time series data from a product market. In the estimation, we account for the endogeneity of marketing variables as well as for heterogeneity across consumers.Our results indicate that both endogeneity as well as heterogeneity need to be accounted for even after allowing for a non-IIA specification at the individual consumer level. Specific to our data, we also find that ignoring endogeneity has a bigger impact on the estimated price elasticities than ignoring the effects of heterogeneity. A comparison of the elasticities obtained from the probit model with those from the corresponding logit specification indicates that the range of elasticities obtained from the probit model across brands is larger than that obtained from the logit. The results have implications for issues such as firm-level pricing.In addition to specifying a probit model and providing comparisons with the logit model, the paper also addresses the third issue raised above. We propose a simple alternative to the purchase incidence/brand choice specification by decomposing the demand for a brand into a category demand equation and a conditional brand choice share equation. We provide a comparison of results from this specification to those from the specification that includes the no-purchase alternative and find that estimated elasticities are sensitive to the specification used. We also estimate the demand function parameters using a traditional specification such as the double-logarithmic model. Here, we find that the estimated elasticities could be signed in such a manner as to be not useful for firm-level pricing decisions.One of the key limitations of the proposed model is that while it accounts for the purchase incidence and brand choice decisions of households, it does not account for differences across consumers in their purchase quantities. The model and analysis are best suited for product categories in which consumers typically make single-unit purchases. Another limitation is more practical in nature. While recent advances have been made in computing probit probabilities, it could nevertheless be a challenge to do so when the number of alternatives is large.

Many past studies have recognised the importance of a shift in the supply of a commodity as a measure of the impact of research. Several of these have discussed a range of options for mathematically representing this shift in an aggregate supply function. Among those, the most realistic assumption would be ‘supply shift as parallel’ and subdividing the production area in to homogenous regions in terms of the impact of the innovation in question on yield and production costs. But, very few researchers have focused on the importance of understanding the theoretical linkages underlying these possible shifts across homogenous Production Environments (PE). It is also crucial to disaggregate the total aggregate welfare estimates based on different categories of adopters as well as production environments (PEs). In general, the normal aggregate estimates masks the range of important implications of research impacts by hiding the exceeded welfare gains of favourable environments with that of lower benefits to the non-favourable environments. There is an equal chance of committing significant empirical error in over measuring the welfare changes by ignoring the different production environments. The detailed understanding of different production environments and technology adoption process facilitates incorporation of each component of the story/activity in its appropriate form rather than developing an additional set of hypothetical assumptions. It is obvious that the corresponding unit cost reductions will not be the same across heterogeneous production environments for a given specific technology in particular region. This research paper will present empirical results of chickpea improved cultivars adoption in Andhra Pradesh state of India and provides a deeper understanding about dis-aggregated production environments and matching unit cost reductions in measuring welfare changes due to research.

Testing exact aggregation in income and household characteristics: the effects of aggregation across goods

MONEY DEMAND FUNCTIONS, as used in macroeconomic theory and in applications to monetary policy, have their theoretical underpinnings in models of portfolio optimization for the individual wealth holder. The use of these functions in an aggregative framework, in the absence of specific premises regarding aggregation, suggests the assumption that all cash holders respond in a uniform way to the same set of variables. Such an assumption is open to question. Separable categories of decision makers can be defined and cash holding behavior may vary across categories. For instance, households, non-financial firms and financial institutions may all determine their demands for cash according to the fundamental principles embodied in the standard portfolio models, but attempts to capture this behavior in money demand functions could properly involve the use of different explanatory variables and structural relations for each sector. Put another way, predictions of the aggregate amount of money demanded based on separate functions for each sector could be more accurate than those based on a single aggregative function. Little attention has been paid to this problem in the extensive literature on the demand for money. The small number of hypotheses that are widely used to generate aggregate money demand functions suggests that it is not difficult to evaluate the empirical importance of the problem. That is, functions considered useful at the aggregate level can be tested at the sectoral level. As well as subjecting these hypotheses to the standard statistical tests on data for a particular sector, their performance can be compared to that of money demand functions that reflect specific sectoral characteristics. The thesis abstracted here reports on such an analysis for the non-financial business sector. Quarterly data on manufacturing corporations in the U.S., from 1947 to 1963, were for the study. A priori suspicions turned out to be justified. Two forms of money demand functions widely accepted at the aggregate level, those based on the permanent income hypothesis and the wealth hypothesis, performed badly on this set of data. The third and simplest of the commonly used hypotheses, that money demand depends on income and the interest rate, fared somewhat better, but not as well as those functions that incorporated additional hypotheses specifically relevant to the firm. The latter hypotheses are based on the argument that the portfolio models normally used to determine optimal cash balances involve an array of assets that is too narrowly defined to represent the firm's behavior. The firm's 'portfolio' involves a complex balance sheet. Thus, the rates of return on assets and liabilities other than the standard marketable ones (e.g., accounts receivable and payable, inventories, bank loans and bonded debt), along with other variables that relate the firm's cash flow to its income flow, are considered in the analysis as well.

Other| March 01 1977 The Aggregate Supply Function: A Correction1 Don Patinkin Don Patinkin Search for other works by this author on: This Site Google History of Political Economy (1977) 9 (1): 156–159. https://doi.org/10.1215/00182702-9-1-156 Cite Icon Cite Share Icon Share Facebook Twitter LinkedIn MailTo Permissions Search Site Citation Don Patinkin; The Aggregate Supply Function: A Correction. History of Political Economy 1 March 1977; 9 (1): 156–159. doi: https://doi.org/10.1215/00182702-9-1-156 Download citation file: Zotero Reference Manager EasyBib Bookends Mendeley Papers EndNote RefWorks BibTex toolbar search Search Dropdown Menu toolbar search search input Search input auto suggest filter your search Books & JournalsAll JournalsHistory of Political Economy Search Advanced Search The text of this article is only available as a PDF. Copyright © 1977 by Duke University Press1977 Article PDF first page preview Close Modal You do not currently have access to this content.

Keynes' Aggregate Supply Function: A Suggested Interpretation

This study aims to estimate aggregate import demand function for Bangladesh economy by using the data of 1980 to 2008. Estimation evidence provided by using autoregressive distributed lag (ADRL) approach to cointegration and rolling window regression method to estimate the coefficient of each observation in the sample by fixing the window size. The estimation result confirms long run relationship between imports, relative price and economic activity, and long run economic growth elasticity is (0.93) positive and relative price elasticity in the long run (-0.29) is negative. In contrast regression results of rolling window method demonstrates that the long run elasticities of national income variable are vary in the range of 0.81 to 0.96 and the relative price elasticities are negative according to the theory except few years.

Optimal market segmentation of hotel rooms—the non-linear case