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Demand behaviour in Spain during the last three decades: What is the ideal microeconomic model to represent consumer preferences?

García, Lucia (2018): Demand behaviour in Spain during the last three decades: What is the ideal microeconomic model to represent consumer preferences?

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Abstract

This paper analyses the recent evolution of Spanish Consumption at the household level. The main aim is to study different models to discover how best to represent consumer preferences of Spanish households. Results show that the theoretical microeconomic model that best fits is the dynamic Rotterdam model, with homogeneity and symmetry restrictions imposed. Furthermore, it is possible to show how household spending has evolved in recent years. Our work will contribute to an understanding of the evolution of consumption, which represents around 60% of Spain’s GDP. We provide empirical evidence, with OECD data for 36 years, taking as a sample the years from 1980 to 2015. Our central objective is to show the level of consumption for three decades, allowing us to understand the degree of development, wellbeing, and growth of Spain,and to analyze in detail consumer preferences by showing results for income and price elasticities. This study tracks the evolution of income elasticities and the differences between direct and crossed price elasticities, as well as Marshallian and Hicksian price elasticities.

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