American Economic Review Vol. 98 No. 4 2008

Giffen Behavior and Subsistence Consumption

Robert T. Jensen¹; Nolan H. Miller²

¹ Watson Institute for International Studies, Brown University, 111 Thayer St., Providence, RI 02912, and National Bureau of Economic Research. · ² John F. Kennedy School of Government, Harvard University, 79 JFK St., Cambridge, MA 02138.

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.

DOI

10.1257/aer.98.4.1553

Volume

98

Issue

4

Pages

1553-1577

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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