SFB 303 Discussion Paper No. A-231

Author: Hennig-Schmidt, Heike
Title: Family Expenditure Survey, Methodology and Data Used in Microeconomic Demand Analysis
Abstract: Neoclassical demand theory is based on the assumption that individuals behave in such a way that they maximize their preference relation under budget constraints. Under reasonable additional assumptions this hypothesis was thought to give enough structure to the model of a consumption sector that together with the production sector of an economy uniqueness and stability of a general equilibrium model would be ensured. Research in this area has shown that this hope is only fulfilled if either strong assumptions are made on the preference relations of the individuals or on the distribution of individual characteristics, especially on the distribution of individual income and expenditure (Hildenbrand 1983). The advantage of the latter approach is that these assumptions, even if they are extremely restrictive, refer to observable entities while preference relations cannot be observed. In order to test the above mentioned hypothesis one needs information on the distribution of income and expenditure in an economy. Family budget surveys provide the necessary data for these analyses. In particular, the Family Expenditure Survey of the United Kingdom does extremely fit this purpose since data are available not only for individual income and expenditure but also for a great variety of household characteristics. Moreover, the detailed information indispensable for our analyses can relatively easy be obtained for as long a period as nearly 20 years. The purpose of this paper is to give the methodological background of the Family Expenditure Survey as well as explanations and definitions of those items that have been or reasonably could be utilized in microeconomic demand analysis.
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Creation-Date: April 1989
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