functions have indifference curves that are "blown-up" versions of one another.
Suppose there are three goods, [x.sub.1],[x.sub.2], and [x.sub.3], and one taxpayer whose preferences can be represented by the homothetic utility
function u ([x.sub.1],[x.sub.2],[x.sub.3])=[([x.sub.1][x.sub.2]).sup.1/4][x.sub.3.sup.1/2].
(ii) the countries are assumed to be identical in every respect, including factor endowments, technology, and homothetic utility
functions of representative consumers.
Although homotheticity produces attractive simplifications of aggregation theory, it is implausible that any population is well characterized by an assumption of identical homothetic utility
functions - in Samuelson and Swamy (1974) label this a "Santa Claus" assumption.
Each household is assumed to have the same homothetic utility
function for housing and non-housing consumption.
If the hypothesis of homothetic utility
is maintained, the COL bias has upper and lower limits of 0.23 and 0.16 percent per year, respectively.