Template-Type: ReDIF-Paper 1.0
Title: The Law of Aggregate Demand : Empirical Evidence From India Using Nonparametric Direct Average Derivative Estimation procedure 
Author-Name: Manisha Chakrabarty 
Author-Email: 
Classification-JEL: D12, C12, C14 
Keywords: Aggregation, Heterogeneity, Income effect, Law of Demand, Average derivative estimator, Nonparametric regression 
Abstract: This paper attempts to provide empirical evidence of the positive definiteness of the mean income effect matrix, a sufficient condition for market demand to satisfy the {\it law 
	of demand} derived by H\"{a}rdle, Hildenbrand and Jerison [HHJ(1991)]. Increasing heterogeneity in spending of populations of households leads to this sufficient condition which is 
	falsifiable from cross-section data. Based on this framework we use the National Sample Survey (NSS) 50-th round data (1993-1994) for the rural sector of Maharashtra > to examine 
	the empirical viability of this condition. Due to a restrictive assumption on the density function and several other limitations of the indirect method we use the nonparametric direct average 
	derivative estimation procedure [Stoker (1993)], unlike the indirect method used in the HHJ paper. It is shown that the income effect matrix is, indeed, positive definite. The required 
	heterogeneity condition is also well supported in this data where one can not expect too much variation in spending patterns of population given the source of data, i.e., rural sector of a 
	developing economy. 
Note: 
Length: 17
Creation-Date: 2001-12	
Revision-Date: 
File-URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse37_2001.pdf
File-Format: application/pdf
Handle: RePEc:bon:bonedp:bgse37_2001