TY - JOUR

T1 - Demand elasticities for 9 goods in 37 countries

AU - Clements, Kenneth W.

AU - Si, Jiawei

AU - Selvanathan, Eliyathamby A.

AU - Selvanathan, Saroja

PY - 2019/12/9

Y1 - 2019/12/9

N2 - In most OECD countries, consumption absorbs more than three fourths of their country's GDP. Therefore, the study of their consumption patterns is important. This paper gives up-to-date estimates of income and price elasticities for 9 commodities in each of 37 countries that are members (or affiliates) of the OECD. In addition, the paper presents a detailed analysis of OECD consumption patterns in the form of investigating empirical regularities and testing demand theory hypotheses. Using differential demand equations, we find that the hypothesis of homogeneity hypothesis is supported in all countries; there is some evidence that symmetry is problematic, although we cannot be sure about this; and preference independence (whereby the marginal utility of each good depends only on its consumption) is not rejected in 90% of the countries. The study also finds that income elasticities of rich countries are generally lower than those of poorer countries, and, in general, there is a negative linear relationship between own-price elasticities and income. These elasticities can be used as key inputs in economic policy modelling such as CGE modelling and GST estimation.

AB - In most OECD countries, consumption absorbs more than three fourths of their country's GDP. Therefore, the study of their consumption patterns is important. This paper gives up-to-date estimates of income and price elasticities for 9 commodities in each of 37 countries that are members (or affiliates) of the OECD. In addition, the paper presents a detailed analysis of OECD consumption patterns in the form of investigating empirical regularities and testing demand theory hypotheses. Using differential demand equations, we find that the hypothesis of homogeneity hypothesis is supported in all countries; there is some evidence that symmetry is problematic, although we cannot be sure about this; and preference independence (whereby the marginal utility of each good depends only on its consumption) is not rejected in 90% of the countries. The study also finds that income elasticities of rich countries are generally lower than those of poorer countries, and, in general, there is a negative linear relationship between own-price elasticities and income. These elasticities can be used as key inputs in economic policy modelling such as CGE modelling and GST estimation.

KW - Consumption

KW - demand elasticities

KW - differential demand equations

KW - preference independence

KW - OECD

U2 - 10.1080/00036846.2019.1693698

DO - 10.1080/00036846.2019.1693698

M3 - Article

JO - Applied Economics

JF - Applied Economics

SN - 0003-6846

ER -