Giffen Behavior and Subsistence Consumption

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Citation

Jensen, Robert T. & Miller, Nolan H. (2008). Giffen Behavior and Subsistence Consumption. The American economic review, 98, 1553-1577.

Abstract

This paper provides the first real-world evidence of Giffen behavior, i.e., upward sloping demand. Subsidizing the prices of dietary staples for extremely poor households in two provinces of China, we find strong evidence of Giffen behavior for rice in Hunan, and weaker evidence for wheat in Gansu. The data provide new insight into the consumption behavior of the poor, who act as though maximizing utility subject to subsistence concerns. We find that their elasticity of demand depends significantly, and nonlinearly, on the severity of their poverty. Understanding this heterogeneity is important for the effective design of welfare programs for the poor.

URL

http://dx.doi.org/10.1257/aer.98.4.1553

Reference Type

Journal Article

Year Published

2008

Journal Title

The American economic review

Author(s)

Jensen, Robert T.
Miller, Nolan H.