Giffen Behavior: Theory and Evidence

Robert T. Jensen, Nolan H. Miller

NBER Working Paper No. 13243
Issued in July 2007
NBER Program(s):   AG

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, with both demand and calorie elasticities depending significantly, and non-linearly, on the severity of their poverty. Understanding this heterogeneity is important for the effective design of welfare programs for the poor.

(424 K)

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Published: Robert T. Jensen & Nolan H. Miller, 2008. "Giffen Behavior and Subsistence Consumption," American Economic Review, American Economic Association, vol. 98(4), pages 1553-77, September.

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This paper was revised on December 7, 2007

Acknowledgments

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