Abstention and Aggregation in Consumer Demand: Zero Tobacco Expenditures

This paper examines the implications of zero expenditures at the micro level for the modeling of aggregate consumer demands. Zero expenditure by an individual consumer on a good is not considered at the budget allocation stage. When such zero expenditures are included in the data the resulting parameters may be unstable, reflecting changes in the proportion of zero expenditures in the data. The issue is investigated empirically using pooled Family Expenditure Survey data for the United Kingdom. for 1970-84, focusing on the demand for tobacco. Copyright 1994 by Royal Economic Society.