The Free Electricity Allowance and the Engel Curve

In 1994 over 18 per cent of Irish households possessed a free electricity allowance. This creates complications in using the 1994-95 Household Budget Survey to estimate an Engel curve for electricity expenditure. Ignoring the allowances leads to biased estimates of elasticities and distorts comparisons between sectors. Examining the sub-populations with and without allowances results in conclusions leading to a substantial revision of the income elasticity for household electricity expenditure and to deductions about possible current and past welfare losses inherent in the free electricity scheme.

Sums and Products of Indirect Utility Functions

There are relatively few known demand systems that are theoretically satisfactory and practically implementable. This paper considers the possibility of deriving more complex demand systems from simpler known ones by considering sums and products of the component indirect utility functions, an approach that does not seem to have been exploited previously in the literature. While not all sums and products of valid utility functions need yield new valid utility functions, it is possible to usefully extend the range of available utility functions. Some of the demand systems that result are interesting and potentially useful - the simpler (in a parameter parsimony sense) for applied general equilibrium studies and for theoretical explication, while more complex systems have potential for the analysis of real world consumption data.

The Generalised Extreme Value Distribution as Utility Function

The idea that probability distribution functions could provide appropriate mathematical forms for utility functions representing risk aversion is of respectable antiquity. But the relatively few examples that have appeared in the economics literature have displayed quite restrictive risk aversion properties. This paper examines the potential of the generalised extreme value (GEV) distribution as utility function, showing it possesses considerable flexibility as regards risk aversion properties, even in its single parameter form. The paper concludes that the GEV utility function is worth considering for applications in cases where parametric parsimony matters.

Generalised Translation of Indirect Utility Functions

This paper considers the derivation of new demand systems from existing ones through replacing an indirect utility function ) , ( y U p by } ) / ( , { j y p y y U j j â ã Ó . p , where p is a vector of prices and y is income. This is a generalisation of Gorman translation ) , ( j j p y U ã Ó . p and will be shown to be effective in terms of producing new demand systems with both good regularity and flexibility properties.Translation,indirect utility functions,demand equations

Generalised Means of Simple Utility Functions with Risk Aversion

The paper examines the properties of a generalised mean of simple utilities each displaying risk aversion, that is, with first derivative positive and second derivative negative. It proves the mean is itself a valid utility function with the appropriate signs for derivatives and investigates risk aversion properties. It shows that simple component utilities, each of which may have quite restricted risk aversion properties, can be parsimoniously combined through the generalised mean formula to give a much more versatile utility function.

The Generalised Extreme Value Distribution as Utility Function

The idea that probability distribution functions could provide appropriate mathematical forms for utility functions representing risk aversion is of respectable antiquity. But the relatively few examples that have appeared in the economics literature have displayed quite restrictive risk aversion properties. This paper examines the potential of the generalised extreme value (GEV) distribution as utility function, showing it possesses considerable flexibility as regards risk aversion properties, even in its single parameter form. The paper concludes that the GEV utility function is worth considering for applications in cases where parametric parsimony matters.

When Do Probit Residuals Sum to Zero?

Probit residuals need not sum to zero in general. However, if explanatory variables are qualitative the sum can be shown to be zero for many models. Indeed this remains true for binary dependent variable models other than Probit and Logit. Even if some explanatory variables are quantitative, residuals can sum to almost zero more often than might at first seem plausible.

GENERATING GLOBALLY REGULAR INDIRECT UTILITY FUNCTIONS

Despite their scarcity in the literature, an abundance of globally regular indirect utility functions, involving as many parameters as desired, exists. They are easily constructed as a function of simple homothetic component utilities.Global regularity,indirect utility functions,

A New System of Consumer Demand Equations

This paper commences from a new indirect utility function and derives the corresponding system of equations, relating commodity demands to prices and income, that satisfies the constraints imposed by utility maximisation (aggregation, homogeneity, Slutsky symmetry and negativity). As the famous linear expenditure system (LES) is a special case of this new system, it is named the generalised Stone-Geary system (GSGS) and it incorporates a generalisation of the ‘subsistance’ income concept to one of ‘committed’ income. However, the GSGS is not subject to the well known limitations of the LES and it can model a reasonably representative range of consumer behaviour. It is also relatively parsimonious in parameters involving just 3n - 1, where n is the number of commodities. The new system has greater ranges of theoretical validity than various systems derived from ‘flexible’ functional forms. As with the LES, simple conditions on the parameters guarantee the validity of the system for all variable values except, perhaps, at low incomes.

Sums and Products of Indirect Utility Functions

There are relatively few known demand systems that are theoretically satisfactory and practically implementable. This paper investigates building more complex demand systems from simpler known ones by considering sums and products of basic utility functions, an approach that does not seem to have been exploited previously in the literature. Some of the systems that result are interesting and usefully extend the range of available functions. Even the simpler systems that are not sufficiently flexible for the analysis of real world consumption data may still be useful for applied general equilibrium studies and for theoretical explication. Although some systems, instead of being new, turn out to be rediscoveries of already known ones, the way in which they arise as combinations of simple components is of interest in itself in showing them as sub sets of wider classes.