Abstract
This note provides a complete characterization of the optimality of a budgeting procedure under which a household (or society) allocates to each member a proportion of its total expenditure that is independent of income but not necessarily independent of prices—a procedure that we call proportional budgeting. The restrictions turn out to be closely related to the results of recent research on weaker forms of aggregation across agents (aggregation that is weaker than Gorman’s (1953) exact aggregation). In particular, proportional budgeting requires that the Engel curves have rank two—equivalently, that they belong to Muellbauer’s (1975, 1976) generalized-linear class of utility functions. Because of individual idiosyncracies, however, the proportional-budgeting preference restrictions do not imply the aggregation conditions in any of the recent aggregation literature.
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© 1993 Springer-Verlag Berlin · Heidelberg
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Blackorby, C., Russell, R.R. (1993). Samuelson’s “Shibboleth” Revisited: Proportional Budgeting Among Agents and Rank-Two Demand Systems. In: Diewert, W.E., Spremann, K., Stehling, F. (eds) Mathematical Modelling in Economics. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-78508-5_4
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DOI: https://doi.org/10.1007/978-3-642-78508-5_4
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