Engel Curves Research Articles

Absolute Poverty Measurement with Minimum Food Needs: A New Inverse Method for Advanced Economies

Spurred by the need for increased adequacy and international comparability, absolute poverty measures are gaining in policy relevance around the world. This paper proposes a simple and feasible method of calculating absolute poverty thresholds on the basis of households’ minimum food needs in advanced economies. It makes three important contributions. First, it demonstrates that conventional statistical methods used in the developing world deliver either unrealistically low or improbably high poverty estimates in rich countries where household spending on food is modest in relative terms. Second, it proposes a new simulation-based inverse method that focuses on the non-food Engel curve and uses predetermined minimum food bundles not as inputs but as targeted reference points in order to calculate adequate poverty thresholds. Finally, an empirical application of the new method using household budget survey data from Italy shows that resulting poverty estimates are comparable to the official figures of the Italian Statistical Office in terms of both the poverty rate and the poverty profiles. Requiring few and easily procurable resources, the proposed algorithm is well suited to produce robust, consistent and internationally comparable absolute poverty estimates in a large number of developed countries and emerging economies.

Engel curves on outsourcing and foreign environmental taxes: A valued‐added approach

AbstractThis paper estimates Engel curves on the foreign content (outsourcing) and the foreign environmental taxes embedded in the consumption of final goods and services in the United States (U.S.). We estimate Engel curves using U.S. household income and consumption information from 1996 to 2011 and find that they are concave and shift down over time. Importantly, our results suggest a coherent picture where the foreign content and the foreign environmental taxes in U.S. household consumption bundles decreased on average over time primarily because of a composition effect where the significant income increase has led to a shift in consumption towards goods and services with lower foreign content and lower foreign environmental taxes. Both effects represent a movement along their respective Engel curves. Consequently, other effects besides income changes play a minor role in the evolution of consumer decisions and their relationship with foreign content and environmental taxes.

Footprint analysis and the incidence of emission taxes

We show that the incidence of emission taxes on consumer income classes is proportional to the footprints of their respective consumption bundles. The dimensions of the footprints are industry by product, but the literature employs industry-by-industry input-output coefficients. We rectify footprint analysis by returning to the underlying national accounts, the use and make tables. Bringing in budget shares data of the different income classes (Engel curves), we show that the carbon dioxide footprint per euro expenditure decreases with income in the Netherlands. Our result renders an emission tax regressive and thus implies a tradeoff between environmental and income policies.

Crowding-out effect of tobacco consumption in Indonesia

BackgroundTobacco consumption is pervasive in Indonesia, with 6 out of 10 households in the country consuming tobacco. Smoking households, on average, divert a significant share (10.7%) of their monthly budget...

Impact of tobacco spending on intrahousehold resource allocation in Montenegro

BackgroundThe main goal of this study is to estimate the crowding out impact of tobacco expenditures on the household budget allocation to other mutually exclusive commodity groups in Montenegro.MethodologyThe analysis...

Consumption Quality and Employment Across the Wealth Distribution

Abstract In the U.S., market hours worked are approximately flat across the wealth distribution. Accounting for this phenomenon is a standing challenge for standard heterogeneous-agent macro models. In these models, wealthier households consume more and work fewer hours. We propose a theory that generates the cross-sectional wealth-hours relation as in the data. We quantify this theory in a heterogeneous-agent incomplete-markets model with three key features: a quality choice in consumption, non-homothetic preferences, and a multi-sector production structure. We show that the model produces consumption expenditure patterns consistent with the data and realistic “quality Engel curves”.

Testing the permanent income hypothesis using the Spanish Christmas Lottery

Purpose This study aims to investigate the impact of local windfall gains from the Spanish Christmas lottery on household consumption behavior. Design/methodology/approach The study applies differences-in-differences to assess permanent income hypothesis (PIH) validity, examining pre- and postlottery consumption effects. Additionally, it also uses an instrumental variable regression, using the lottery shock as an instrument for total expenditures, to estimate the Engel curves. Findings The paper finds a PIH violation; households in winning region notably increase consumption on durable and nondurable goods compared to nonwinning ones. Moreover, durable goods consumption is responsive to lottery winnings, while nondurable goods consumption are unit-elastic to expenditure shocks. Originality/value To the best of the author’s knowledge, this is the first paper analyzing the effects of winning regions of the Spanish Christmas lottery in all types of consumption goods, testing its consequences in the PIH and estimating its effects in the Engel curves.

Household carbon dioxide emissions Engel Curve dynamics

AbstractHousehold carbon dioxide emissions depend on the household's attributes and location. Wealthier suburbanites drive more and consume more energy at home. In recent years, affluent individuals have been more likely to purchase electric vehicles and install solar panels. Using several datasets from California, we observe that these shifts in consumer behavior have flattened household Carbon Emissions Engel Curves in the transportation sector and the electricity sector. Based on voting data from a 2018 proposition to repeal a fuel tax in California, we document that communities tend to support higher fuel taxes when their vehicle fleet is more fuel‐efficient.

Estimation of Quadratic Food Engel Curve in the presence of Measurement Error and Endogeneity of Total Expenditure in Pakistan

This study is conducted to compare the four different estimation techniques, Ordinary least square, Instrumental Variable, Lewbel (1996) approach and control function approach estimating the quadratic food Engel curve in the presence of the problem of measurement error and the problem of endogeneity of total expenditure. The authors have used the HIES data 2010-11 as it has been observed that the HIES data 2010-11 fits a quadratic shape of food Engel curve in Pakistani context. Moreover, the expenditure elasticity of food demand was observed between zero and one which indicates the fact that food is a necessary good for Pakistani households. The results also shows that endogeneity of total expenditure is more serious issue than the measurement error.

ARE UNOBSERVABLES SEPARABLE?

It is common to assume in empirical research that observables and unobservables are additively separable, especially when the former are endogenous. This is because it is widely recognized that identification and estimation challenges arise when interactions between the two are allowed for. Starting from a nonseparable IV model, where the instrumental variable is independent of unobservables, we develop a novel nonparametric test of separability of unobservables. The large-sample distribution of the test statistics is nonstandard and relies on a Donsker-type central limit theorem for the empirical distribution of nonparametric IV residuals, which may be of independent interest. Using a dataset drawn from the 2015 U.S. Consumer Expenditure Survey, we find that the test rejects the separability in Engel curves for some commodities.

The global emission mitigation potential of avoiding waste and product lifespan extension by Chinese households

This paper examines the emission mitigation potential of Chinese households’ low-carbon behavior by 2030 through a global carbon footprint scenario analysis. The emission reduction effect is estimated by comparing the projected global emissions in 2030 in a lifestyle emulation scenario and a low-carbon scenario, in which Chinese households adopt low-carbon consumption behaviors. Lifestyle emulation is modeled based on what we call “world Engel curves”, which describe how the expenditure share of a certain consumption good depends on the total per capita expenditures for household consumption (which depends on income). By including a dynamic link between household lifestyle changes and GDP, we then obtain the emission projections under different scenarios in 2030, based on the historical data for 49 countries from 1995 to 2011 from EXIOBASE. Our results show that adopting a mild low-carbon lifestyle by households helps only little in terms of reducing GHG emissions. Reducing avoidable waste and expanding the lifetime of products are not enough to help meeting the 2 °C goal. More drastic changes are required.

INFERENCE IN PARTIALLY IDENTIFIED PANEL DATA MODELS WITH INTERACTIVE FIXED EFFECTS

In this paper, we develop methods for statistical inferences in a partially identified nonparametric panel data model with endogeneity and interactive fixed effects. Under some normalization rules, we can concentrate out the large-dimensional parameter vector of factor loadings and specify a set of conditional moment restrictions that are involved with only the finite-dimensional factor parameters along with the infinite-dimensional nonparametric component. For a conjectured restriction on the parameter, we consider testing the null hypothesis that the restriction is satisfied by at least one element in the identified set and propose a test statistic based on a novel martingale difference divergence measure for the distance between a conditional expectation object and zero. We derive a tight asymptotic distributional upper bound for the resultant test statistic under the null and show that it is divergent at rate-N under the global alternative. To obtain the critical values for our test, we propose a version of multiplier bootstrap and establish its asymptotic validity. Simulations demonstrate the finite sample properties of our inference procedure. We apply our method to study Engel curves for major nondurable expenditures in China by using a panel dataset from the China Family Panel Studies.

What is the shape of Environmental Engel Curves? Evidence using Panel Data

What is the shape of Environmental Engel Curves? Evidence using Panel Data

Measuring Welfare and Inequality with Incomplete Price Information

Abstract We propose and implement a new approach that allows us to estimate income-specific changes in household welfare in contexts where well-measured prices are not available for important subsets of consumption. Using rich but widely available expenditure survey microdata, we show that we can recover income-specific equivalent and compensating variations from horizontal shifts in what we call “relative Engel curves”—as long as preferences fall within the broad quasi-separable class (Gorman 1970, 1976). Our approach is flexible enough to allow for nonparametric estimation at each point of the income distribution. We apply the methodology to estimate inflation and welfare changes in rural India between 1987 and 2000. Our estimates reveal that lower rates of inflation for the rich erased the real income convergence found in the existing literature that uses the subset of consumption with well-measured prices to calculate inflation.

Influence of female and male incomes on food expenditures of Nicaraguan households

Otras investigaciones han explorado si los ingresos del hogar son utilizados de la misma manera dependiendo del género de la persona que los genere. Sin embargo, la mayoría de estos estudios no incluyen dentro del análisis a los hogares con múltiples miembros generadores de ingreso. Este trabajo intenta llenar este vacío en la literatura explorando los cambios en los gastos alimentarios de los hogares generados ante una variación en los ingresos de las mujeres frente a aquellos percibidos por los hombres, tanto en los hogares nucleares con dos generadores de ingresos como en los formados por múltiples miembros generadores de ingresos. Este estudio es exploratorio y utiliza la Encuesta de Medición del Nivel de Vida (EMNV) de Nicaragua de 2014 como fuente de información. Para ello, se estima una curva de Engel de alimentos, utilizando análisis de regresión, que integra la noción de coaliciones de intereses de género como parte de las variables demográficas. No se encontraron grandes diferencias entre las asignaciones del presupuesto del hogar destinado a alimentación frente a los cambios de los ingresos laborales generados por mujeres y hombres. Las características personales analizadas afectan de forma negativa el gasto en alimentación. Por el contrario, las características del hogar, i.e., número de personas generadoras de ingresos y área de residencia, son los principales determinantes del aumento de los gastos alimentarios del hogar. No se encontraron diferencias entre hogares nucleares y múltiples generadores de ingresos.

Dispute Resolution in Indonesian Islamic Banking: Previous Trends and Future Perspectives

Currently, the legal environment for dispute resolution in the Islamic banking industry in Indonesia is not sufficient to achieve the main purpose of establishing a bank. Although Islamic legal frameworks are important for resolving financial disputes recognized under classical Islamic law, this paper aims to overcome increasing disputes as Islamic banking revenues increase. , provides arguments and solutions for resolving Islamic banking disputes using the Engel curve theory of microeconomics. Therefore, changes in the income of Islamic banks in Indonesia do not significantly affect changes in alternative dispute resolution/ADR requests. Even if the demand for ADR continues to grow, the demand for ADR will be relatively smaller than the change in Islamic banking earnings. The legal framework is dispute resolution in the Islamic banking industry based on the alternative dispute resolution (ADR) process that Prophet Muhammad has demonstrated since his stay in Medina. Conclusion; With this in mind, the Islamic banking services industry is saved from litigation domination that always comes with negative stereotypes about unnecessary payments.

PLOTTING ENGEL CURVES FOR COMMODITIES "FOOD" AND "EDUCATION" IN THE CONTEXT OF UKRAINIAN HOUSEHOLDS’ WELL-BEING EVALUATION

The article is devoted to the adaptation of Engel's curve tools for evaluating the well-being of Ukrainian households. In particular, the assessment of the welfare inequality, observed between households with the lowest equivalent per capita income and the most affluent households, as well as the main trends in the change of the consumption structure for the period 2014-2020. The research is based on the concept that overcoming the concentration of consumer spending around the purchase of food is a necessary condition for the launch of microeconomic mechanisms of socio-economic development because it allows households to actively invest in the accumulation of human capital and thus overcomes the monopoly of budget financing of social sphere industries. To assess the level of satisfaction with food needs, the Engel line "income - food consumption" was constructed and the coefficient of elasticity of food consumption from income was determined. Similar calculations were made concerning the consumption of goods created by the educational sector.According to the results of the Engel function development, the income elasticity of the absolute amount of food consumption is equal to 0.47: an additional percentage of income encourages households to increase the amount of food consumption by 0.47%. According to our calculations, the income elasticity of educational goods consumption is equal to 0.928 (an additional percentage of real income encourages Ukrainian households to increase the amount of educational goods consumption by 0.93%). Therefore, Ukrainian households value education enough and tend to use economic opportunities (income released from priority needs satisfaction) for expanding education consumption.Both assessments of elasticity coefficients indicate that the achieved level of meeting food needs for the vast majority of Ukrainian households does not allow them to count on the release of their funds from meeting basic current needs and the expansion of those expenses that have the character of investing in human capital and have a pronounced positive impact on the qualification level of labor resources and the productivity of their use in the national economy.

“Empty Plates”: Impacts of Food Prices, Inequality and Trade on Malnutrition

This paper studies the complex link between nutritional status and income by using panel data from 150 countries over the period 1960–2018 and employing a panel VAR approach under system GMM estimates. The causal link between nutrition intake and income may change from one income group to another due to different effects of similar factors. While hikes in food prices, unfair distributions of income and rising international trade flows lower nutrition intake in lower middle-income countries, the same factors lead to higher body weights in upper middle-income and high-income OECD countries. Therefore, Engel Curve and Efficiency Wage Hypotheses fail for a group of countries.

Out- Of- Pocket health expenditure and household consumption patterns in Benin: Is there a crowding out effect?

Health shocks are common and have serious consequences for households in developing countries where health insurance is lacking. In this study, we examine whether out-of-pocket health expenditures crowd out household consumption of non-healthcare necessities, such as education items in Benin using a sample of 14,952 households from the global vulnerability and food security analysis survey. We estimated a system of conditional Engel curves with three stage least squared (3SLS) and seemingly unrelated regression (SURE) for seven categories of goods using the Quadratic Almost Ideal Demand System (QUAIDS) in the form of budget shares corresponding to proportions of total non-health expenditure. Findings show that out of pocket health expenditure leads households to spend more on health care that in fine crowd out expenditure in other necessity goods such as education item. These findings highlight the need for social protection programs to mitigate the impact of health shocks on vulnerable households in Benin.

Estimation of sharing rule: an application of intra-household collective model on Indian data

PurposeMany aspects of well-being depend critically on individual-level expenditure and consumption. The Millennium Development Goals include the promotion of gender equality and the empowerment of women, which partly have to do with women’s access to resources within households. Many important questions in labour, public and development economics also hinge on the intra-household distribution of resources. This paper aims to estimate the resource shares within a household in the rural and urban sectors of West Bengal through a collective household model, where each household member has a specific utility function. The sharing rule parameters, that determine the apportionment of resources between members within a household, are estimated in an intra-household collective framework. The analysis is based on a system of log-quadratic Engel curves estimated using the 68th round (2011–2012) household-level consumption expenditure data of the Indian National Sample Survey Office (NSSO) for rural and urban sectors separately for the state of West Bengal.Design/methodology/approachThe sharing rule parameters (that determine the apportionment of resources between members) within a household are estimated in an intra-household collective framework as suggested by Dunbar et al. (2013). The analysis is based on a Quadratic Almost Ideal Demand System (QUAIDS) estimated using the 68th round (2011–2012) household-level consumption expenditure data of the Indian NSSO.FindingsIn this paper, the authors estimate the sharing rule of total household expenditure between couples in a household in the state of West Bengal. They use a modified version of the QUAIDS and the 68th round (2011–2012) household-level consumer expenditure data provided by the NSSO. From the exercise, it emerges that on an average, the resource shares between husband and wife in a household is about 66:34% in the rural sector and about 60:40% in the urban sector. Based on a classification of households by the distribution of resource shares, where higher resource share for the husband is classified as “Husband dominated” and the reverse as “Wife dominated”, the percentage of “Husband dominated” households is much more in both sectors. This unequal distribution of resources may have far-reaching consequences on allocation of expenditure on the children of the household. The authors leave this exercise as a future project.Originality/valueThis paper is an attempt to estimate the sharing rule for households using NSSO consumption expenditure data. This paper also highlights the intra household unequal resource allocation through the sharing rule. They use a modified version of the QUAIDS and the 68th round (2011–2012) household-level consumer expenditure data provided by the NSSO. From the exercise, it emerges that on an average, the resource shares between husband and wife in a household is about 66:34% in the rural sector and about 60:40% in the urban sector. Based on a classification of households by the distribution of resource shares, where higher resource share for the husband is classified as “Husband dominated” and the reverse as “Wife dominated”, the percentage of “Husband dominated” households is much more in both sectors. This unequal distribution of resources may have far-reaching consequences on allocation of expenditure on the children of the household. The authors leave this exercise as a future project.