INTERDEPENDENT PREFERENCES - AN ECONOMETRIC-ANALYSIS

The theoretical model of Gaertner (1974) and Pollak (1976) for the int erdependence of preferences in the Linear Expenditure System is estima ted for a cross-section of households. The interdependence of consumpt ion of different households has implications for the stochastic struct ure of the model and for the identifiability of its parameters, Both a spects are dealt with. The empirical results indicate a significant ro le played by the interdependence of preferences. One of its implicatio ns is that predictions of the effects of changes in a household's exog enous variables differ according to whether the exogenous variable onl y changes for this household or for all households jointly. (C) 1997 J ohn Wiley & Sons, Ltd.