Angus Deaton – Reason for Nobel Prize

Angus Deaton (앵거스 디턴)

Development Economist (Poverty & Inequality)

His Achievements

1. Measure of Poverty (가계동향조사 분석 및 창시)

Analysis of Household Surveys

Non-traded goods in poor countries are cheaper (Hair-cut, Houses…)

So, the current measure Living Standard measures can be misleading.

Originally used a common set of price:

BUT each countries have different consumption baskets.

eg) USA – Cheese consumption is HIGH    l    China – Cheese consumption is LOW

He is the Designer of the Household Surveys

2. Permanent Income Hypothesis (PIH) (항상소득가설을 반박)

Why is Consumption so smooth?

PIH is a theory of consumption behaviour used in Demand & Consumption Analysis in macroeconomics.

Deaton was testing PIH (Deaton’s Paradox)

1. For US, GDP has been persistently growing
2. BUT, Consumption Volatility was a lot lower
3. PIH suggest that IF income process is persistent,
   Consumption Volatility > Income Volatility

• BUT Not observed in data (Quantitatively Disproved)
• Consumption Exhibits some extra smoothness

3. Almost Ideal Demand System (AIDS) (준이상수요체계)

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Try to Estimate how people respond to change in Prices