# SFB 303 Discussion Paper No. A-456

**Author:** Hildenbrand, Werner, and Alois Kneip

**Title**: Aggregate
Consumers' Expenditure and Income

**Abstract:** The following question is analyzed: under what
circumstances can one establish a stable (i.e., time invariant) functional relationship
which links aggregate consumption in period t with aggregate income in
period t and another "determinants" of consumtion that refer to periods
prior to period t and can be derived from observable distributions of
households' characteristics? The basic hypothesis on which our model
is built is the hypothesis of a "structurally stable" evolution. This hypothesis
has good empirical support. The proposed dynamic model of consumers' expenditure
implies the observed regularities of aggregate consumption and
income data such as the high linear association of aggregate income and
consumption for short-run time series. The compatibility of our model
with empirical data and its predictiv power is discussed using time-series of cross-section data, the U.K. Family Expenditure Survey from
1968 to 84.

**Keywords:** Aggregation, consumption function, structural
stability, prediction

**JEL-Classification-Number:** B41, C14, D12, E21

**Creation-Date:** October 1994

**URL:**
../1994/a/bonnsfa456.pdf

**Graphiken**:
../1994/a/bonnsfa456gr.zip
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