Two-stage Budgeting as an Economic Decision-making Process for Spanish Consumers

Two-stage budgeting as an economic decision-making process for consumers is illustrated by its application to new data. After showing that the Spanish observed behaviour is consistent with utility maximization, we estimate, for each stage, the elasticities of a dynamic AIDS model, which allow us to explain the economic decisions of consumers. The main findings show that all goods are normal and display decreasing demands, as theory predicts. In particular, transport, in the first stage, and the purchase of personal vehicles, in the second, show the highest expenditure effects. Moreover, transport and public transport display the highest Marshallian own-price elasticities. © 1997 John Wiley & Sons, Ltd.