Consumer Budget Research Articles

Slutsky compensating variation for assessing inflationary pressure on the income of the Ukraine population

The article is devoted to the improvement of analytical tools, applying for household well-being assessment through using Slutsky compensating variation concept for the consideration of changes in the structure of consumer expenditures, as a factor, impacting the power of inflationary pressure. Authors propose to use the formula for calculating the compensating variation of income on the basis index of consumer price for every commodity group with a specific weight relevant to the share of spending on the appropriate commodity in the consumer budget. Calculations according to the proposed methodology made it possible to reveal significant differences in the distribution of inflationary pressure between Ukrainian households with different equivalent per capita incomes. The trend of shifting the burden of inflation to the least wealthy sections of the population looks extremely threatening. Having a highly concentrated demand (the majority of their budget is spent on essential goods, the prices of which are rising the fastest), such households face extremely unfavorable conditions for the development and even simple reproduction of human potential, and the effectiveness of social protection programs is clearly insufficient to counteract the decline in well-being and risks of marginalization of these population groups.

Separating substitution and psychological effects of price with a two-step conjoint approach: Application to luxury goods

Price can have direct psychological effects on utility, beyond the standard indirect substitution effect through its impact on the budget available for other goods. This paper proposes a theory driven modeling framework to (i) empirically disentangle and measure the psychological and substitution effects of price, and (ii) identify heterogeneous drivers of the psychological effect. We then provide a two-step conjoint design to collect necessary data to identify the model and a method to estimate it. We illustrate how the modeling framework can be used with secondary luxury purchase data to measure the psychological and substitution effect, when data on consumer budget for the category is available. We then illustrate our conjoint method, by collecting data for the luxury goods and estimating the model. We find three segments with heterogeneous drivers of the psychological effect: price prestige seeking, self-reward, and price prestige avoidance.

Sensitivity Analysis between Lagrange Multipliers and Consumer Budget: Utility Maximization Case

In this paper sensitivity analysis between Lagrange multipliers and total budget is discussed. The method of Lagrange multipliers is a very useful and powerful technique in multivariable calculus. In mathematical economics, utility is the vital concept that increases or decreases overall happiness of the consumers. This study tries to discuss utility maximization policy of an organization by considering two constraints: budget constraint and coupon constraint. In this article, an attempt has been taken to achieve the best result through the application of scientific method of optimization.

Revealed Preferences

When the preferences of a consumer can be represented by a utility function, the consumption (the demand) of the consumer is obtained by the maximization of the utility under the consumer budget constraint and the prices of goods. Actually, what is known is the demand correspondence obtained from observations and not one hypothetical utility function. The revealed preferences consists in constructing utility functions from demand correspondences. We present a short state of art on the question in the differentiable case as well in the non differentiable case. Things are not so simple as shown from some pathological examples.

Formation of motivation HR-engineering on the base of flexible tariff normation of payment for labor

The theoretical and methodological principles of further development and improvement of the tariff system of labor remuneration were studied. The existing tariff systems for workers' wages have proven highly imperfect. They contain certain rudiments of tariff systems of directive and planned economy. Scientific and theoretical approaches were determined, and the optimal algorithm for the formation of motivational HR engineering based on a flexible tariff was developed. Methodical and practical recommendations for choosing the absolute value of the tariff rate of the first category using reduction on a flexible basis are proposed. Two methods have been developed: calculation-analytical and market, which show the socio-economic vector of the further development of the tariff system and provide a wide choice of the most optimal size of the tariff rate, which, on the one hand, ensures the necessary and sufficient level of wages, and on the other - causes high motivation workers to perform the assigned operation, work or set of results in certain organizational and technical conditions of production. In the first case, it is recommended to take either the average level of wages formed at the enterprise, economic sphere, industry, region of Ukraine or the officially established size of the consumer budget - subsistence, rational, elitist, etc. In the second case, the tariff rate is determined based on the market price of the labor force formed on the local, regional, or national labor markets. A wide selection of indicators enables any enterprise to conduct a balanced tariff policy, considering its financial condition and the need to ensure the appropriate level of wages and motivate workers to work both as a basis for calculating the first-tier tariff rate and as a certain socio-economic reference point for the further development of the tariff system. Keywords: tariff rate, salary, tariff system, HR engineering, motivation, tariff category.

Analysis of the possibility of eliminating excess inequality through income redistribution

The main idea of the research paper is the redistribution of personal incomes. The subject is the effects of eliminating excess inequality. The core of the research paper is creating a model of erasing personal incomes under the subsistence minimum using a redistribution model. One possible way to get rid of personal incomes below the subsistence minimum is a partially progressive tax, which separates income into different sectors and settles a tax rate for each sector. Eventually, the redistribution can be held by certain society groups using a tax for wealthy people and government subsidies for poor segment of the population or evenly proportional income redistribution. It is useful to consider and compare two indicators: subsistence minimum and minimum consumer budget. A minimum consumer budget is a set cost of food and non-food products and services that meet basic physiological and sociocultural needs. In fact, it is the cost of the minimum consumer basket. The minimum consumer budget determines the lower bound value of life in society, followed by poverty. In Russia, this indicator is not popular, but it has a potential to be useful. In fact, one of the most important function of a tax system is keeping balance in society. The methodology is a redistribution optimization model. The optimal level of income inequality implies that there is a level of income inequality that maximizes economic growth. The optimization model consists of key parameters that determine inequality level, such as tax rate, education, and fertility. In some ways, the tax scale is not fair for definite groups of people. People have a social order to reconsider a tax scale. The result is a block of recommendations for shifting personal income inequality rate to a balanced point. The paper is aimed to provide a strategy for applying the fairer redistribution model with simple computations and prove that it can be applied with relatively low effort.

Developing Assistance To Low-Income Citizens Of The Republic Of Bela-rus In Ensuring Food Security

The article describes the practical ways to support the living standards of Belarusians through the use of price regulation and social security stand-ards: the subsistence minimum budget and the minimum consumer budget. The information about the Agreement concluded between large retailers and the Ministry of Antimonopoly Regulation and Trade of the Republic of Bel-arus is scrutinized. The essence of the agreement is to provide discounts on vital food products to the economically vulnerable groups of the population. The author gives her own vision of the mechanism for providing food aid to needy citizens.

Evolution of the wine market in Europe: trends and barriers in the context of the COVID-19 pandemic

Abstract Evolution of the COVID-19 pandemic has brought considerable transformations to the worldwide markets, creating an economic and sanitary crisis. Distribution channels were disrupted, affecting supply networks and business models. With restaurants and bars closed down, banned airlines and travel restrictions implemented, the economic well-being of worldwide industries got disturbed. As global decreases in alcohol trade were registered, wine market was appraised an industry worthy of being taken under consideration, with focus on its market size, incurred revenues, price evolution and degree of embracing digitalization to adapt to the ongoing restrictions imposed by the COVID-19 pandemic. The latter one referring to traditional wine tasting rooms which were banned due to the lockdown, wine industry found online wine tasting as a profitable alternative. The presented metrics were analyzed in Europe, with a high focus on region’s main wine producers: France, Spain, Italy, Germany and Portugal, but not only. Research followed an exploratory approach to determine changes under pandemic restrictions, lockdown and finally economic crisis in the selected industry, by engaging international available data and statistics. The study, therefore, formulated relevant hypothesis based on market size and registered revenues, price evolution and adoption of online wine tasting strategies. Results of the paper highlight decreases in market size and revenues of European wine market, however, on the long-term, industry revival is forecasted. Prices slightly decreased mainly for prestigious wines (AOP labelled), showing consumer budget restraints brought by the crisis. European’s wine market digitalization show differences among countries, with Germany being a leader for engaging such technologies. Our paper brings a snapshot of current trends and barriers under the COVID-19 pandemic, acting as a future basis and guidance for researchers in the field.

FORMATION AND REGULATION OF THE MINIMUM WAGE FEATURES IN GEORGIA

In the interests of economic development and economic efficiency, in the current global crisis, priority is given to the development of human capital, increase the competitiveness of the workforce, creating fundamentally new mechanisms to stimulate labour, this, in turn, ensures an increase in labour productivity, its quality and efficiency. The successful solution of this problem requires the improvement of the organization of wages and its optimal state regulation. In the conditions of the current global crisis, role of the state in the field of wage regulation is more social in nature and its main function is to ensure a minimum level of income for the population. This last one, should be carried out by establishing a real subsistence minimum, a minimum wage and establishing an optimal ratio between them. In developed countries, the minimum wage is regulated on the basis of economic development, labour productivity, the level of average wages and the real value of the minimum consumer budget. The specific amount of the minimum wage is set at the national level by the legislature of the country, and its size in a particular area or region is determined by agreements concluded between trade unions and representatives of trade unions. In determining it, the following shall be taken into account: the needs of workers and their family members; the overall level of wages in the country; the value of life and its change; factors of economic development; level of labour productivity and opportunities to achieve and maintain a high level of employment. The purpose of establishing a minimum wage is to provide social protection for employees. Indeed, "The minimum wage has historically been a social protection mechanism which should protect low-wage workers and their families from poverty" (Khelaia, 2020,2). This problem is especially relevant for our country, because to date, there is no comprehensive mechanism for state regulation of the minimum wage and its defining Legislative Framework. In a scientific article is presented the formation of the minimum wage and its peculiarities of regulation, analysis of the related legal framework from the Soviet period to the present day in Georgia. Is established the basic principles, goals and objectives of minimum wage formation. Particular attention is paid to the assessment of the pros and cons of the legally established minimum wage. The final section presents the main directions for calculating the minimum wage and improving its state regulation in Georgia.

Distortions in willingness-to-pay for public goods induced by endemic distrust in institutions

In this paper, we analyze the implications for the economic valuation of the provision of public goods, considering respondents’ perceptions of the institution(s) that provide the service. The specific behavioral mechanism whereby institutional distrust (ID) shows itself is through the activation of screening of choice options (choice set formation). However, ID-induced choice set formation might be confounded with the consumer budget constraint, especially in a developing country context, leading to biased welfare estimates for service improvement. We formulate a semi-compensatory hybrid choice set formation (SC-HCSF) model that enables us to 1) discriminate the effect of a budget constraint from that of ID-induced choice set formation and 2) characterize their separate impacts on welfare estimates using a spatial framework. We compare our model results to those from a standard Random Parameters Logit (RPL) Model. The RPL underestimates (overestimates) welfare when individuals have a low (high) ID. Based on our empirical model results, we demonstrate that the impacts of ignoring institutional trust issues can be highly deleterious to project appraisals, particularly in settings where legislative and regulatory institutions are perceived to be endemically corrupt.

Analysis of the practice of establishing the size of regional coefficients to the wages of workers in areas with unfavourable natural and climatic conditions and proposals for its improvement

District coefficients are designed to compensate for differences in the cost of living of the population in the northern and eastern regions compared to the central and southern regions due to the unequal needs of the population. On the basis of the content analysis of the legislation the authors showed that in order to improve the legislation on regional coefficients to the wages of workers in areas with unfavorable natural and climatic conditions for the population, it is necessary to prepare new methodological approaches to determining the size of regional coefficients on the basis of the minimum (recovery) budget or the minimum consumer budget and to introduce the practice of establishing uniform regional coefficients for the wages of all employees of enterprises, organizations and institutions in the constituent entity of the Russian Federation or in municipal districts and urban districts within the constituent entity of the Russian Federation.

A Critical Investigation of Consumer Response for Monetary and Non-monetary Promotions Across E-services

Monetary and non-monetary promotions are very evident in e-commerce. Consumer comes across them daily while making purchase decisions. This study brings in the perspective of how consumer leverages the two types of promotion when they choose to make their e-purchase. Study focuses on three service sectors (ordering food online, booking ride online and booking event tickets) and how consumer response differs across them for evaluating two categories of promotion. Consumer budget also plays an important role. It changes the consumer shopping orientation as well as the evaluation of promotion while making a purchase decision. Study also shows that gender play a significant role while evaluating monetary promotion; however, non-monetary promotions are no different for them. The findings of the study have implications for e-retailers to implement their promotional strategies more efficiently.

Budget overestimation when dealing with an uncertainty goal

We conducted 2 studies (N = 86 and 248) to examine people's tendency to overestimate their personal budget. The findings support 3 hypotheses. First, about 35% of participants in our first study tended to overestimate their budget when dealing with an uncertainty goal. Second, we found that focalism played a mediating role in this relationship. Third, in our second study we found that temporal distance positively moderated this relationship: The distant future strengthened the effect of dealing with an uncertainty goal on budget overestimation, whereas the near future attenuated it. These findings shed light on the cause and internal mechanism of consumer budget overestimation. Theoretical and practical implications are also discussed.

Socially acceptable consumer budget in the Arctic regions of Russia

The need for accelerated social and economic development of the Arctic as a priority geostrategic territory of the Russian Federation requires a special approach to the issues of incomes of the population of the Arctic regions, and, above all, to the social criterion. Foreign experience in formation of minimum consumer budgets, domestic developments in this area and methodological principles of its formation used for a living wage have determined the priorities in choosing a social criterion. The key role in addressing this issue is played by the system of low-income consumer budgets (the subsistence minimum (SM) and the socially acceptable (recovery) consumer budget, which exceeds the subsistence minimum by about 3 times) within the framework of the general classification of the system of normative consumer budgets developed by the scientific school of the All-Russian Center for Living Standards. The methodological basis for formation of a socially acceptable consumer budget is determined by the provisions based on the recovery level of population consumption in conjunction with low incomes and taking into account the satisfaction of material, spiritual and social needs, a variety of consumer properties and benefits, as well as the impact on the consumption characteristics of the natural, climatic, economic, social and other special factors of the Arctic. Important for the social criterion qualities — validity and transparency — are ensured through application of the normative method of forming a socially acceptable consumer basket, which includes sets of food products, non-food goods and services. The normative socially acceptable consumer budget is differentiated by the specific of consumption of different categories of the population that is reflected in the structure and volume of consumption. The size of the socially acceptable consumer budget is determined by the cost of the consumer basket, as well as expenses on savings and mandatory payments and fees. Regional differences in the factors influencing the formation of a socially acceptable consumer budget cause territorial diversity in the level of the indicator in the Arctic zone.

25 Years of Monitoring Income and Living Standards of the Russian Population

The article is devoted to understanding the results of 25 years Of monitoring of income and living standards of the population (hereinafter-Monitoring) in post-Soviet Russia. Monitoring began in 1995 in connection with the disorganization of the economy in the early 90's of the last century and the need to respond to the negative consequences of rapid growth in prices and tariffs and changes in consumer consumption, which have a pronounced regional specificity. The objects of Monitoring and its conceptual framework are presented. The article describes the main blocks of its indicators: generalizing, social standards, labour and employment, monetary income, social support, spending and consumption, socioeconomic differentiation, including a total of 79 indicators and indices, and shows the methodological basis for their calculations. The main attention is focused on the analysis of the values and dynamics of qualitative assessment indicators, which are a comparison of statistical primary and analytical values with criteria standards – social standards of current consumption and their monetary equivalent. These include the development of a system of consumer budgets for the population of different levels of material security: the subsistence minimum, the socially acceptable / minimum consumer budget, and consumer budgets of medium and high affluence. The article analyzes the values and dynamics of purchasing power of per capita monetary income, the social structure of the population by the level of material security, and interregional differentiation of income and living standards at key points in the period 1995-2019. The prospects for the development of Monitoring, which the article associated with the continuation of its unifying role in the study of the values and dynamics of indicators of income and standard of living, with profound economic and social differentiation of the population based on social standards, income, housing, quality of employment, etc., as well as testing new indicators to complement social data of the state statistics in the sensitive areas of revenue generation and standard of living, taking into account unstable (precarious) employment, digitalization of the economy, changes in the sources and structure of payments provided by social protection of the population.

Development of the Mechanism for Regulating Low Income from Employment as a Trend of Increasing the Living Standards of Population of the Russian Arctic

The Arctic has a special place in the strategy of socioeconomic development of Russia. The strategic tasks outlined at the present stage imply the integrated development of the Arctic, achieving positive changes in the economy and the social sphere, raising the standard of living and the role of income from employment in ensuring the livelihoods of the population. The article is devoted to the mechanism of regulation of low income from employment, considered in the framework of improving the living standards of citizens living and working in the Arctic.The Object of the Study. Arctic living standardsThe Subject of the Study. Regulating low incomes from employment of the Arctic populationThe Purpose of the Study. Development of a mechanism for regulating low income from employment in the Arctic in order to improve the living standards of the populationThe Main Provisions of the Article. Low income from employment negatively affects the standards of living of the population. In the Arctic, the situation is aggravated by a weak social infrastructure, high cost of living, and territorial remoteness from developed industrial centres. Low labour incomes are causing low-income households and high social risks. The current system of state guarantees and compensations, designed to reimburse additional material and physiological costs in connection with work and living in extreme climatic conditions, does not eliminate the problem of low incomes. The economic effect of district coefficients and northern allowances for seniority is insufficient for this. The lack of incentives for social and economic feasibility to live and work in harsh northern conditions leads to undesirable trends in migration processes. The continued outflow of population is a big problem for the modern Arctic.An important policy for improving the living standards of the population is an effective policy for regulating low income from employment. The key role is played by the mechanism for regulating wages and its criteria basis. Their development is focused on the two-dimensional system of social criteria of low-income considered in the work, which is formed on the basis of consumer budgets – the cost of living and the socially acceptable (recovery) consumer budget. The paper gives suggestions for the creation of Arctic systems of remuneration and taxation of business.

The Marshallian demand curve revisited

Did Marshall assume a compensated or an uncompensated demand curve? I argue that it was neither: I show that the Marshallian demand curve is a willingness-to-pay curve derived under the assumption that all prices and income are held constant. This curve approximates both compensated and uncompensated demand curves only if expenditure on the good in question represents a negligible part of the consumer budget. I argue that my interpretation, highlighting the approximate character of Marshall’s approach, provides a more accurate account of the Marshallian demand curve than do alternative interpretations that rely on the utility-maximization framework and mathematical exactness.

Absolute value and diversity of household spending: analysis on International Comparison Program (ICP) 2011 data

Research background: This article investigates the connection between consumer?s budget growth and diversification of household spending. The main question of research is ?are there new drivers of modern processes of consumer spending's diversification, at a time when spending on food has reached the minimum share in the consumer budget.
 Purpose of the article: The objective of the article is to clarify the hypothesis about the existence of a certain limit of income (and consumer spending) after which the growing of consumer?s purchasing capacity loses power of influence on spending diversity.
 Methods: Theil entropy index was used for measuring the diversity of household spending. This index was defined as a sum of within-group and between-group entropy, which allows for comparing the diversification of household spending in two aggregate groups of expenditure, which were formed by the authors. The Workings? equation was used for modeling the spending entropy?s dependence on their absolute value. Two categories of household spending were regrouped (consolidated) by us through forming a group more related to the development of human economic potential (SMRHD) and less related to these processes (SLRHD). The research was done on the basis of ICP (2011) data, which covers 178 countries and refers to 2011 year ? the latest available on the moment of the article was completed.
 Findings & Value added: The results obtained in this research confirmed that there is a limit of household spending?s size, beyond which further increasing of consumers? economic opportunities loses a significant impact on the diversity of consumption spending. However, the weakening of the link between size of spending and its entropy reflects impact of two qualitative differenced factors. The first is relatively much more radical decrease of spending growth influence on within-group entropy for SLRHD. The second ? is relatively much less significant decrease of entropy?s sensitivity to spending growth for SMRHD. Such results reflect the increase in the importance of "non-functional demand components", which reduces the capacity of data on functional distribution of household expenditures to characterize the extent of their diversification.

Українська економічна думка останньої третини XIX – початку XX ст. у контексті розвитку європейської ліберальної традиції

The article analyzes the features of the development of marginalism and the emergence of a modern methodology for the analysis of economic processes in Ukrainian economic thought, starting with the development of the Kyiv scientific school headed by M. Bunge and ending with the works of prominent Ukrainian scientists E. Slutsky and M. Tugan-Baranovsky. These problems, considering their relevance for the present, are the subjects of modern scholars’ researches, such as T. Hayday, I. Golovata, V. Kudlak, O. Kurbet, V. Nebrat, N. Suprun, Y. Ushchapovsky, V. Feshchenko and others. The purpose of the article is to highlight the scientific contribution of Ukrainian economists of the last third of the 19th – beginning of the 20th centuries to the development of marginalism and Western European liberalism, to reveal the emergence of a new methodology of economic analysis based on the combination of ideas of classical political economy and marginal analysis, the historical school’ principles with the European socio-reformism, and the use of functional analysis with economic and mathematical research tools. Significant progress of the Ukrainian economic science in this period are the theoretical achievements of representatives of the Kyiv School of Political Economy. In the works of M. Bunge, D. Pikhno, R. Orzhentsky, and O. Bilimovych, the attention was focused on the development of the theory of value with the use of marginal analysis, the psychological foundations of the theory of value were supported, and the emphasis was placed on the social orientation of research. E. Slutsky's works «The Theory of Marginal Utility», and «On the Theory of Consumer Budget» reflected new approaches to understanding utility as an economic category, determined the value of market goods in terms of their usefulness and rarity, and initiated the study of market behavior and mechanisms of formation and stability of the consumer budget. In the context of the formation of the new methodology for economic analysis, the author reveals the priority and significance of the creation of the synthetic theory of value by M. Tugan-Baranovsky. The article highlights the significant influence of Ukrainian scientists of the studied period on the development of world economic science and substantiates the necessity of further study of their scientific work.

Consumer Behavior in the Context of Global Economic Transformations

Transition to alternative methods of service and omnichannelity allows the buyer to be more demanding and discerning. The current trends in the development of retail trade caused globalization forcing the redistribution of consumer budget from a high-margin offline cart to a low-margin online cart that instigate not only the necessity of transformations in management, but also the study of consumer behavior.Dynamical development of trading innovative technologies allows the buyers not only to expand the range of their aspiration, but also to become participants in the cognitive and learning processes, where the acquirement of the new experience and emotions influences the traditional ways of making purchases on offline trading.To remain competitive, retailers should not only provide high-quality goods and services at the best prices, but also to contribute to their high-quality and get-to-able supply. Most purchasing decisions are made by feel, that contradict to the theories of rational choice and theories using marketing concepts.The article gives views on the factors and criteria that determine consumers behavior in online and offline trade.