Integrability and aggregation in the theory of demand

Harold Hotelling believed that integrability was a necessary characteristic of both individual and market demand equations, and he demonstrated that it would hold if consumers did not have a budget constraint. If there was a budget constraint, he contended, the usual integrability condition would be replaced by a condition which assures that an integrating factor can be introduced. This paper shows that this condition can be satisfied only if the consumer's income effect is the same numerically for all goods. Aggregation by summation of individual demands is considered, and it is shown that this form of aggregation is valid if there is a budget constraint only when income effects are the same for all individuals.     

近代中国和日本总需求变动的比较分析

从19世纪80年代开始，中日两国开始经济近代化。与传统社会相比较，近代中日两国是处在一种由封闭经济向开放经济，自然经济向市场经济转变的过渡时期。过渡型经济形态的本质特征就决定了近代中日经济发展过程中的总需求发生了很大变化，其对近代中日经济增长的贡献力也更加突出。本文从宏观的角度，采用实证分析和动态分析方法，就近代中日总需求的变动趋势及其特征展开实证分析，探究其形成原因，比较中日两国总需求变动的总体特征和异同，辨析中日两国经济发展的历史经验和模式。     

Money demand in the West African economic and monetary union - the problems of aggregation

Regional monetary integration, financial liberalisation andthe adoption of indirect policy instruments continue to changethe conditions for monetary policy in the West African Economicand Monetary Union (WAEMU). While the identification of a stablemoney demand relationship has become a crucial element for monetarypolicy, differences in economic behaviour between Côted'Ivoire and the remaining countries may induce instabilityat the aggregate level. This paper analyses the demand for moneyfor the entire WAEMU, the six smaller member countries, andCôte d'Ivoire. A stable aggregate money demand functionis identified and interpreted in light of the results for thesub-regional estimations.     

Dynamic panel cointegration approaches to the estimation of money demand functions

This paper investigates properties of the money demand functions of Group of Six (G6) member countries (Canada, France, Italy, Japan, U.K., and U.S.) using the estimation and inference techniques of panel cointegration. Empirical analyses are conducted by estimating money demand equations of G6 countries individually and as a whole, allowing heterogeneity in individual specific fixed effects across countries through dynamic, nonstationary panel estimation techniques. By using recently developed panel cointegration techniques, the paper contributes to the literature of money demand studies by improving the power performance of the relevant estimation and inference procedures. It reports fully modified OLS (FMOLS) estimation results of the money demand model for different data frequencies, to find varying signs and magnitudes of real income, interest rates and inflation elasticities of money demand for G6 nations.     

An economic rationale for a system of loglinear asset demand functions

Summary In this paper we derived a system of asset demand functions from an expected utility maximization model, in which the utility function satisfies both the decreasing absolute risk aversion as well as the increasing relative risk aversion criteria. The rates of return are assumed to be distributed as a multivariate log-normal distribution. It is shown that a system of log-linear asset demand functions follows from the exact model as an approximation and performs better than similar types of linear asset demand functions which follow from a negative exponential utility function.I am grateful to Professor A. R. Bergstrom and Mr. R. E. Bailey for their comments on an earlier draft. Comments from the referee of this journal helped me to improve my presentation. I am also grateful to Professor R. Bandyopadhyay for his comments. I am solely responsible for any errors.     

Aggregate demand and supply

This paper is part of a broader project that provides a microfoundation to the General Theory of J. M. Keynes. I call this project "old Keynesian economics" to distinguish it from new-Keynesian economics, a theory that is based on the idea that to make sense of Keynes we must assume that prices are sticky. I describe a multi-good model in which I interpret the definitions of aggregate demand and supply found in the General Theory through the lens of a search theory of the labor market. I argue that Keynes' aggregate supply curve can be interpreted as the aggregate of a set of first-order conditions for the optimal choice of labor and, using this interpretation, I reintroduce a diagram that was central to the textbook teaching of Keynesian economics in the immediate post-war period.     

Socio-demographic dynamics and household demand

The relationship between household characteristics and household expenditure in the United States is explored. "The basic hypothesis of this paper is that socio-demographic characteristics of households are important determinants of their expenditure patterns as are price and income variables."     

Energy demand and population changes

During the post World War 2 years energy consumption has grown 136% while population grew about 51%; per capita consumption of energy expanded, therefore, about 60%. For a given population size, demographic changes mean an increase in energy needs; for instance the larger the group of retirement age people, the smaller their energy needs than are those for a younger group. Estimates indicate that by the year 2000 the energy impact will be toward higher per capita consumption with 60% of the population in the 19-61 age group of workers. Rising female labor force participation will increase the working group even more; it has also been found that income and energy grow at a proportional rate. The authors predict that gasoline consumption within the US will continue to rise with availability considering the larger number of female drivers and higher per capita incomes. The flow of illegal aliens (750,000/year) will have a major impact on income and will use greater amounts of energy than can be expected. A demographic change which will lower energy demands will be the slowdown of the rate of household formation caused by the falling number of young adults. The response of energy demand to price changes is small and slow but incomes play a larger role as does the number of personal automobiles and social changes affecting household formation. Households, commercial space, transportation, and industry are part of every demand analysis and population projections play a major role in determining these factors.     

Income concentration and market demand

We analyze the effects of income concentration and income dispersionon market demand and its elasticity. We show that, followingan increase in income concentration towards the middle (measuredby variations in mean preserving spread), the increase in demandfaced by firms which serve at the margin middle income consumers,is associated with an increase in price elasticity—accordingly,the positive effects of the size of the market becoming widerare amplified by a higher degree of competition. Our resultshold for a large number of possible income distributions.     

Potential demand and external trade

Summary Both in theoretical and empirical studies of international trade relative prices play a dominant role. Standard international trade theory asserts that under certain conditions the price mechanism may lead to an equilibrium between demand for and supply of goods from and to different countries. For short periods, some relevant conditions may not be fulfilled; in that case other adjustments such as changes in non price conditions may equate demand and supply or, alternatively, disequilibria may exist. Direct statistical evidence on non price conditions, excess demand and excess supply is scarce.This paper describes a partly indirect approach of the not price conditioned trade fluctuations. The basic model assumes that these fluctuations are largely dependent on pressure of demand, which is defined as the tension between potential demand and potential supply. In this way both exports and imports are divided in a potential component, dependent on relative prices, and a pressure induced component. The other main assumption is that actual domestic demand changes according to the demand function. Combining these relations, potential demand for domestic products is the sum of domestic demand and potential export demand minus potential import demand. Potential supply is assumed to be a constant fraction of the exogeneously given production capacity.The model is used for an iterative approximation of the changes in potential demand and pressure of demand for the Netherlands. For this purpose estimations for actual exports and actual imports of commodities are derived from the model. In the initial estimations, potential demand is approximated by means of actual demand, during consecutive rounds the results of the preceding stages are used. After three rounds the coefficients are stable. The values calculated for the yearly changes in potential demand are for most years in concordance with a priori expectations. For the reference period, the explanatory power of the computed pressure of demand is either of about the same quality as that of conventional pressure variables or better.     

Money illusion and aggregation bias

Summary This note shows that what often has been called money illusion in macro consumption functions can well be due to aggregation bias: micro consumption functions that are homogeneous of order one in (nominal) income, (nominal) wealth and prices may result in an aggregate consumption function that does not show such a homogeneity.Thanks are due to Professors W. H. Somermeyer and T. Kloek for positive criticism on the first draft of this paper.     

Black abortion demand

Conclusion This study estimates the demand for abortion by black women. The empirical results find that black abortion demand is price inelastic, negatively related to unemployment conditions, and positively related to the presence of state Medicaid and a college education. These results are consistent with the findings in prior studies of all childbearing women. The only two findings at odds with those of all childbearing women were that black women's abortion demands are considerably more responsive to changes in income and do not depend on marital status.     

Kalecki and Marx on effective demand

Conclusion Whereas Marx and Kalecki shared a broad vision of the capitalist system, the convergence of their theories occurred mainly on the ground of effective demand.Marx furnished Kalecki with the idea that deficiencies in aggregate demand are rooted in the normal workings of the capitalist system, but he did so without providing any theoretical demonstration of this proposition. Kalecki was confident, however, that he had solved Marx's unresolved problems by proving that the equations that determine the level of total output are contained in the scheme of extended reproduction.Whether Marx would have considered Kalecki's solution appropriate for the system inCapital is quite another matter. As explained above, Kalecki shifted the emphasis from the production of surplus value to the realization of surplus value and from the conditions of exploitation to the conditions of the market. It is a change that Marx would have had difficulties in accepting. Indeed, it was precisely his reluctance to follow this route that steered Marx away from an attempt at solving the problem of effective demand; a problem he skirted when he was in the process of formulating his schemes of reproduction.If one adds Kalecki's interest in market prices and his distaste for the labor theory of value, it would be difficult to avoid the conclusion that Kalecki was neither a faithful disciple of Marx nor a single-minded articulator of his economic theories. It has been argued that this was precisely Kalecki's strength [Robinson, 1979, p. 253]: With the light that Sraffa has thrown on the theory of value and Kalecki on the process of realization of the surplus, we can develop a complete system, not ofneo-Marxism but ofintelligible Marxism.An earlier version of this paper was presented at the Twenty-Sixth Atlantic Economic Society Conference, October 6–9, 1988, Philadelphia, Pennsylvania.     

Foreign-affiliate presence and skilled labour demand

This paper investigates the effect of inward foreign investment on the relative employment of skilled labour. The extensive review of the empirical evidence shows that the results seem to be country-specific. Using Canadian industry-level panel data, the paper shows that most Canadian industries have experienced skill upgrading, and that foreign investment, as measured by FDI or majority ownership, has contributed to this development. Moreover, notwithstanding higher regulatory restrictions on foreign investment into Canadian services industries, foreign investment has had a similar impact on skill upgrading across both the services and non-services sectors. Finally, offshoring is found to only have a positive significant impact on skill upgrading in the services sector.     

Money demand and stabilisation in Zimbabwe

During the 1980s the potential instability of Zimbabwe's unsustainablyhigh budget deficit was reduced by the smooth transfer of resourcesfrom the private to the public sector via the domestic financialsystem, which affected private demand for financial assets.Import, exchange and price controls operated to suppress private-sectordemand. This led to the build-up of private savings, which wason-lent to the government via liquid asset requirements andthe crowding out of domestic deposits in the nonbank privatesector's portfolio by government securities. This article usesJohansen's procedure for analysing cointegration to model thedemand for real money balances in Zimbabwe, in order to determinethe extent to which these constraints on the domestic assetmarket suppressed the demand for money in Zimbabwe.     

Metal demand and consumption in Russia

The metal need formation mechanism is determined by the development of reproduction processes. This article assesses the active mechanism of meeting the Russian economy’s need for metalline products. Analyses have shown that the export-oriented development of production processes in resource supplying sectors of the economy promoted the formation of an import-oriented investment model. Current developments contain an economic growth crisis potential due to an accruing economic imbalance.