Income distribution and composition of consumer demand in the Spanish economy

Abstract

In this paper we formulate a complete system of demand functions, to characterize the change in private consumption demand induced by the redistribution of consumers' income. This system attempts to cover the lack of a demand model suitable for the study of the income redistribution effect on the structure of the Spanish productive system. The specification of the model is such that the Price Independent Generalised Linearity (PIGL) conditions hold, thereby ensuring a consistent aggregation across consumers. It is also assumed that the Relative Income Hypothesis holds. The estimation is made with data from a survey of household budgets.