A Synthesis: 1. Aggregation, Income Distribution and Consumer Demand (Muellbauer,J.) 2. Specifications and Aggregation Theory: Ch 3, 3. Estimation of Linear Expenditure System (Pollak,R.A. And Wales,T.J.) 4. Aggregate Consumer Behavior Without Exact Aggregation (Nicol,C.J.)

Abstract

The four papers on aggregation theory and estimation of demand function together provide a complete picture starting from the underlying theory of aggregation and specification to empirical estimation of demand functions. The first paper is about the aggregation across consumers. The second paper explores the properties associated with the Constant Slutsky Elasticity (CSE) model which is closely related to the absolute price version of the Rotterdam Model. The third paper estimates a complete system of demand equations making full use of the restrictions implied by economic theory. This is done using the model formulated by Stone namely, Klein-Rubin. The fourth paper estimates a model of consumer behavior by pooling Canadian cross sectional and time series data. An attempt is made in this synthesis to collate the four papers and understand the entire theory behind demand functions and see how demand functions are estimated empirically after incorporating elements such as leisure, household size to make the theory fit the reality. The first half of the section will draw from the first two papers to understand the theory of aggregation. The following section will draw from the next two papers on empirical estimates to understand the application of theory.