Decomposition analysis of consumers' demand changes: an application to Greek consumption data

Authors: Karagiannis, Giannis1; Velentzas, Kostas2

Source: Applied Economics, Volume 36, Number 5, March 20, 2004 , pp. 497-504(8)

Publisher: Routledge, part of the Taylor & Francis Group

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A decomposition analysis for consumer demand functions is developed. Changes in Marshallian demand or expenditure shares functions over time are decomposed into a total substitution effect, an income effect, and a habit effect. This framework is applied to post-war Greek consumption patterns through a habit persistence version of the Quadratic Almost Ideal Demand System (QUAIDS). It is found that for all commodity categories (i.e., food, beverages and tobacco, footwear and clothing, settling and housing, and others) the income effect was the main driving force in explaining changes in both quantity demanded and expenditure shares, followed by habit and total substitution effects.

Document Type: Research Article


Affiliations: 1: Department of International and European Economic & Political Studies University of Macedonia 156, Egnatia str. 540 06 Thessaloniki Greece 2: Department of Economics University of Macedonia 156, Egnatia str. 540 06 Thessaloniki Greece

Publication date: March 1, 2004

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