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Tests on Condition of Aggregation Across Consumers in Demand Functions-An Empirical Study of Consumption Data in Taiwan



Parallel abstracts

The paper investigates conditions of aggregation across consumers, in empirical demand analysis as well as examines exact aggregation of consumption data in Taiwan. The likelihood ratio tests indicate the null hypothesis of exact linear aggregations and identical preferences across income groups are rejected by the sample data. The results suggest that specifications of an empirical demand system should satisfy nonlinear aggregation conditions and incorporate the effect of income distribution of income groups consumption and incorporate the effect of income distribution if income groups consumption data in Taiwan are empolyed for analyzing consumer behavior.