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The Engel curve for alcohol and the rank of demand systems

โœ Scribed by Takashi Unayama

Book ID
102870651
Publisher
John Wiley and Sons
Year
2006
Tongue
English
Weight
949 KB
Volume
21
Category
Article
ISSN
0883-7252

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โœฆ Synopsis

Abstract

This paper shows that the quadratic shape of the Engel curve for alcohol is induced by preference heterogeneity between drinkers and abstainers in a Japanese data set. With controlling the heterogeneity, it is shown that the Engel curve for alcohol slopes monotonically downwards for drinkers, and that the probability of being a drinker is an increasing function of total expenditure. These two relationships generate a quadratic shape for the Engel curve for alcohol. Other goods in this data set appear to have nearly linear Engel curves, so if the alcohol Engel curve for drinkers is also linear, then after controlling for this preference heterogeneity the rank of this demand system would be two. Copyright ยฉ 2006 John Wiley & Sons, Ltd.

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