Does survey recall error explain the Deaton–Paxson puzzle?

Matthew Brzozowski,Thomas F Crossley,Joachim K Winter

doi:10.1016/j.econlet.2017.06.020

Abstract

Using recall and diary food expenditure data from Canada, we compare estimates of the household size elasticity of per capita food expenditure. In contrast to Gibson (2002), we find negative elasticities in both recall and diary data. This in turn means we find evidence of the “Deaton–Paxson puzzle” in both diary and recall data. Recall error cannot be the sole explanation of the puzzle.

Highlights

In applied demand analysis, the income and household size elasticities of food expenditure play an important role, in thinking about the economies of scale in household consumption
For the purposes of illustration, that the food budget share is adequately modelled by wf = α0 + α1 ln pcy + β ln n + ε where wf is the food share, ln pcy is the logarithm of per capita income, and ln n is the logarithm of household size
If the food share can be taken as a welfare measure, economies of scale require that β be negative

Summary

Introduction

The income and household size elasticities of food expenditure play an important role, in thinking about the economies of scale in household consumption. If the food share can be taken as a welfare measure (as Engel asserted), economies of scale require that β be negative (the budget share should fall with increasing household size, holding pcy constant). The 1996 Canadian Food Expenditure Survey (FoodEx) provides a unique opportunity to study how food expenditure measures constructed from recall questions compare to those obtained from expenditure diaries This nationally representative survey first asked respondents to estimate their household’s food expenditure over the past four weeks, along with basic demographic questions. These two surveys readily lend themselves to comparison.

Results

Discussion

Conclusion