Engel Curves Research Articles

Nonparametric errors in variables models with measurement errors on both sides of the equation

Measurement errors are often correlated, as in surveys where respondent’s biases or tendencies to err affect multiple reported variables. We extend Schennach (2007) to identify moments of the conditional distribution of a true Y given a true X when both are measured with error, the measurement errors in Y and X are correlated, and the true unknown model of Y given X has nonseparable model errors. After showing nonparametric identification, we provide a sieve generalized method of moments based estimator of the model, and apply it to nonparametric Engel curve estimation. In our application measurement errors on the expenditures of a good Y are by construction correlated with measurement errors in total expenditures X. This problem, which is present in many consumption data sets, has been ignored in most demand applications. We find that accounting for this problem casts doubt on Hildenbrand’s (1994) “increasing dispersion” assumption.

Impacto de las remesas en el gasto regional de salud en México 2000, 2005 y 2010

Health is an issue relevant to the conditions and standard of living of households, which is determined by factors such as the availability of services, government support networks, regional development, among other adds. The study of the impact of foreign resources in this regard has not been much addressed. But the meager foreign and national studies show the marginal to positive effect of remittances on health spending. In the case of Mexico regional studies on the subject have not been made, it is therefore the aim of this study is to analyze the impact of remittances on consumption of Health at national and regional level (Conapo, 2004) based on the Home National Survey of Income and Expenditure (enigh's) 2000, 2005 and 2010 using Engel curves. It was found that the expenditure of Health behave like a basic product at the national level and in most regions except the North 2000 y 2010, Central 2010 and South-southeast 2000. Health consumption is primarily present in the more marginal regions as the Traditional and South-southeast ranking first or second in consumption level. A general decrease of consumption of Health in 2000 to 2005 and later retrieval from 2005 to 2010 is observed.

The impact of tobacco expenditures on spending within Turkish households

PurposeThe aim of this study is to determine whether tobacco spending has a ‘crowding out’ effect on food and utility spending within Turkish households. It also examines whether tobacco control...

New Evidence on Intra-Household Allocation of Resources in Japanese Households

This paper examines intra-household allocation of resources to gain insight into family relationships and gender bias in Japanese households. We take the Engel curve approach to examine how adult consumption is affected by the presence of a child, either a boy or a girl, in the family. Empowered by diary-based high quality spending data from the Family Income and Expenditure Survey, our empirical results show that adult consumption is significantly reduced in households with children; furthermore, gender bias is not observed in total adult expenditures, while responses of adult clothing expenses to the presence of a child are significantly different between a boy and a girl: spending on a father's clothing is reduced when the child is a school-aged daughter, while spending on a mother's clothing decreases when a school-aged son is in the home. Our analysis also shows that after the early 2000s girls receive a larger share of spending for children's clothing as well as for high school education than boys.

Indirect taxes for redistribution: Should necessity goods be favored?

The Atkinson–Stiglitz Theorem shows that with weakly separable preferences, differential commodity taxes are not needed if an optimal nonlinear income tax is imposed. Redistributive objectives can be achieved with the income tax alone even if goods differ considerably in their income elasticities of demand. Deaton showed that if the government is restricted to a linear progressive income tax along with commodity taxes, the latter are superfluous if preferences are not only weakly separable but also yield linear Engel curves whose slopes are common to all households. These have potentially strong policy implications since they suggest that the common practice of giving preferential commodity tax treatment to necessities is not warranted. Assuming the Deaton conditions are satisfied, we derive two results to the contrary, regardless of whether labor supply varies along the intensive or extensive margin. First, if income tax, linear or nonlinear, is less progressive than optimal, necessities should be taxed preferentially relative to luxuries. Second, if a linear income tax is optimal but low-income households are unable to afford any luxury goods, it may still be optimal to tax necessity goods at lower rates than luxuries.

The rebound effects of switching to vegetarianism. A microeconomic analysis of Swedish consumption behavior

Sustainable diets, in particular vegetarianism, are often promoted as effective measures to reduce our environmental footprint. Yet, few conclusions take full-scale behavioral changes into consideration. This can be achieved by calculating the indirect environmental rebound effect related to the re-spending of expenditure saved during the initial behavioral shift. This study aims to quantify the potential energy use and greenhouse gas emission savings, and most likely rebound effects, related to an average Swedish consumer's shift to vegetarianism. Using household budget survey data, it estimates Engel curves of 117 consumption goods, derives marginal expenditure shares, and links these values to environmental intensity indicators. Results indicate that switching to vegetarianism could save consumers 16% of the energy use and 20% of the greenhouse gas emissions related to their dietary consumption. However, if they re-spend the saved income according to their current preferences, they would forego 96% of potential energy savings and 49% of greenhouse gas emission savings. These rebound effects are even higher for lower-income consumers who tend to re-spend on more environmentally intensive goods. Yet, the adverse effect could be tempered by purchasing organic goods or re-spending the money on services. In order to reduce the environmental impact of consumption, it could thus be recommended to not only focus on dietary shifts, but rather on the full range of consumer expenditure.

Explaining the Engel Curve: Climbing Up the Growth Ladder

This paper turns the static Engel Curve model of consumption into a dynamic interactive theory of growth. It explains why some countries remain trapped in the vicious circle of low income and low consumption, and works out how some others can move to higher income ground. Thrifty consumption and efficient production are the keys. This paper helps Malthus and Lewis break away from their growth and development trap, but detests Keynes’ spending theory.

Nonparametric identification in panels using quantiles

This paper considers identification and estimation of ceteris paribus effects of continuous regressors in nonseparable panel models with time homogeneity. The effects of interest are derivatives of the average and quantile structural functions of the model. We find that these derivatives are identified with two time periods for “stayers”, i.e. for individuals with the same regressor values in two time periods. We show that the identification results carry over to models that allow location and scale time effects. We propose nonparametric series methods and a weighted bootstrap scheme to estimate and make inference on the identified effects. The bootstrap proposed allows inference for function-valued parameters such as quantile effects uniformly over a region of quantile indices and/or regressor values. An empirical application to Engel curve estimation with panel data illustrates the results.

Market Competition Following Mexico's Telecommunications and Broadcasting Reform: Present and Future

This paper explores the effects of increased competition in the telecommunications and broadcasting sectors that will be brought about by Mexico's recent Telecommunications Reform (2013). The Reform includes measures to encourage competition in the telecommunications sector by way of a new institutional framework. A new Federal Telecommunications Institute (IFT) has been set up, with the power and autonomy to regulate competition in the marketplaces. Specialist tribunals have also been set up and an amendment made to the amparo law to prevent any immediate overturning of the regulator’s rulings. This is in addition to encouraging foreign investment by allowing 100% investment in the telecoms sector and an opening up of the broadcasting sector, allowing for up to 49% foreign capital, subject to a reciprocal investment deal in the corresponding country of origin. When it comes to policies on market competition, we examined the results of the new designation of “preponderante” (market dominant agent) implemented by the Reform, which grants the new regulator an immediate entitlement to impose pro-competition requirements on any economic agent with a greater than 50% share nationally in a given sector. The regulator may thus impose asymmetric regulation on interconnection, local loop unbundling, passive infrastructure sharing, roaming, and potentially call for the divestment of assets to prevent anti-competitive behavior. The paper is organized into two main sections. The first section presents the institutional and regulatory progress made, including the aforementioned legislation designed to foster competition in the telecommunications and broadcasting service markets. The second section focuses on the effects of the Reform, describing progress that has taken place in the implementation of these measures in 2014 and the market’s response over the course of 2015, specifically in terms of the following variables: trends in prices to end-users as a result of the investment: we determine whether there are any changes in investment flows on the part of existing operators and newcomers to the market as a result of the new regulation. Distributive effects of the Reform: we break down figures for access to and expenditure on telecommunications services by decile (Engel Curves) and analyze the distribution of telecommunications services as a function of different levels of household income. We compare the results of this analysis between 2012 and 2014. Economic activity in the telecommunications industry: changes in economic activity are examined, based on published GDP figures attributed to “other telecommunications”. We may also posit future scenarios for how the Reform might be the implemented within the wider context of Mexico’s setup. In the short term (2014-2015), it is possible to achieve successful implementation of the Reform. In the long term, however, two scenarios are foreseeable: optimistically, the Reform may see successful, long-term deployment; less optimistically, success may be limited, since it would require a far-reaching transformation of Mexico’s overall institutional setup.

Improving access to education for South African children who attend school with a tracheostomy

model conditional on the crowding out of tobacco was created using quadratic conditional Engel curves. X2 tests for consumer separability were also performed. Additionally, an analysis of tobacco tax progressivity was completed in order to enhance policy recommendations. Kakwani indices were generated and dominance tests conducted. Findings: Overall, households which consume tobacco spend less on certain commodities compared to households which do not consume tobacco (reduction of expenditure on fruits, vegetables, grains, pulses, education, transportation and fuel are significant at a 5% level). These goods have nutrition and family welfare implications. Generally, trends are more pronounced in urban settings. Also, poorer quintiles tended to spend a greater proportion of their budget on tobacco (3.6% poorest quintile, 2.7% richest quintile). X2 tests led to rejection of the separability between tobacco and most other goods, meaning that tobacco consumers have different preferences and behave differently than non-tobacco consumers.The preliminary conditional demand model confirms many of the trends in the descriptive statistics, namely that vegetable and education spending shares are adversely impacted by tobacco consumption. Initial analysis demonstrates that tobacco taxation is progressive, highlighting potential equity implications to increases of tobacco taxation. Interpretation: There is evidence to suggest that tobacco spending crowds-out the consumption of goods, such as vegetables and education. In particular, poor households and those living in urban areas are most vulnerable. Key policy implications arise regarding the importance of tobacco control measures, such as taxation. Funding: None. Abstract #: 01NCD025

Vývoj podílu výdajů českých domácností za maso a masné výrobky a Engelovy závislosti ve spotřebě

The article deals with the analysis of the shape of the Engel's curve in the field of the expenditures for meat and meat products. Within the analysis, the paper is especially focused on the initial growth phase of the Engel's curve. The CSO data of the average Czech household was used for the research. For the elimination of the price impacts in this income-expenditure analysis, the original CSO data on nominal level were transformed into the real level. The studied real shares were determined with respect to the total food expenditures and also with respect to the total households' incomes. The linear and the quadratic forms of the dynamic Engels' models were developed for the aims of the research. Besides the trend development, the periodical component was investigated. Regression analysis was fully confirmed the validity of the Engel's law in the field of the Czech-household expenditures for meat and meat products. Furthermore, the quadratic model form showed the existence of the initial growth phase of the examined Engel's curve. In case of the real share with respect to the total food expenditures by the model:rw1t* = (–1,0176E – 08) · (rmt*)2 + (2,8498E – 04) · rmt* + [(–1,7011E + 00) + (1,3970E – 03) · t],the size of the real household income is 14 003 CZK. For the second analysed share of the real expenditures with respect to the total households’ incomes, the real level of the income by the developed model:rw2t* = (–2,8844E – 09) · (rmt*)2 + (7,8205E – 05) · rmt* + [(–4,6323E + 01) + (3,1095E – 04) · t]the value was 13 557 CZK.

Identifying the Independent Sources of Consumption Variation

SummaryBy representing a system of budget shares as an approximate factor model we determine its rank, i.e. the number of common functional forms or factors, and we estimate a base of the factor space by means of approximate principal components. We assume that the extracted factors span the same space of basic Engel curves representing the fundamental forces driving consumers' behaviour. We identify these curves by imposing statistical independence and by studying their dependence on total expenditure using local linear regressions. We prove consistency of the estimates. Using data from the UK Family Expenditure Survey from 1977 to 2006, we find strong evidence of two common factors and mixed evidence of a third factor. These are identified as decreasing, increasing, and almost constant Engel curves. The household consumption behaviour is therefore driven by two factors respectively related to necessities (e.g. food), luxuries (e.g. vehicles), and in some cases by a third factor related to goods to which is allocated the same percentage of total budget both by rich and poor households (e.g. housing). Copyright © 2015 John Wiley & Sons, Ltd.

On the performance of fractional multinomial response models for estimating Engel Curves

ABSTRACTEngel curves are often estimated within a linear, or at least approximately linear, system of equations. However, Engel curves are required to lie on or within the unit interval, while summing to unity. These restrictions are not easily accommodated within a linear system. Therefore, we apply the fractional multinomial logit model in our estimation of expenditure shares, because it more readily accommodates these theoretical restrictions. Within our estimation subsample from the South African Income and Expenditure Survey, we find that accounting for these restrictions within the fractional multinomial logit model provides a better fit to the data than does the standard linear system.

An Empirical Analysis of Engel Curve on Energy for Households in Sabah and Sarawak Based on Location and Income Group

The study was focused in forming an empirical model of Engel curve on energy for households in Sabah and Sarawak. Open-ended questionnaire was used as an instrument of study involving 1,002 respondents in Sabah and Sarawak. The dependent variable was budget share of energy expenditure meanwhile the independent variables were total household expenditure, age, household size, educational level, gender and regional variables. The Ordinary Least Square estimation was carried out on the cross sectional data. The coefficients were used to estimate the Engel curve expenditure elasticities. The findings revealed that total household expenditure (income) and household size were the important determinant in explaining the energy expenditure. Meanwhile the estimation of Engel curve expenditure elasticities showed that energy was a necessity good for all income groups in both urban and rural areas. Low income group was found to be more sensitive on energy expenditure to the changes in household income.

Parameter Estimation of the Engel Curve using the Method of Fuzzy Regression to Assess the Level of Welfare in the Republic of Tatarstan

Abstract This article proposes the estimating method of a quality indicator of “population welfare in the region” based on the theory of fuzzy sets. For welfare analysis there are estimated the parameters of Engel curves using the method of fuzzy regression. The resulting model parameters are triangular fuzzy numbers whose cofactor is the fuzzy evaluation of the welfare population in the region. For defazzification of obtained fuzzy number, there is calculated the area of the intersection of fuzzy numbers of the actual wealth level and the possible linguistic terms from “absolute poverty” to “a high level of well-being”. These obtained results suggest that the population of the Republic of Tatarstan has a good and a high level of well-being. The proposed methodology provides an analysis on the short time series and takes account of incomplete or inaccurate information.

Engel curves and price elasticity in urban Chinese Households

On the basis of local concavity assumptions, Exact Affine Stone Index implicit Marshallian demand system is adopted to analyze Engel Curves and price elasticity for Chinese urban household. Our results show that a demand system rank can be polynomials or splines of any order which support the conclusion of Lewbel and Pendakur (2009). Engel Curves are affected by gender and education of householder, the number of minor children and adults. Budget shares of food, clothing and transportation–communication decrease, and other budget shares increase from 1995 to 2007. There are different influences between all categories of price elasticities, most notably dwelling price. In addition, the quickly rising price and slow growth spending hamper improvement of welfare from 2002 to 2012.

Semiparametric estimation of models with conditional moment restrictions in the presence of nonclassical measurement errors

This paper develops a framework for the analysis of semiparametric conditional moment models with endogenous and mismeasured causes, which is of empirical importance. We show that one set of valid instruments is sufficient to control for both endogeneity and measurement errors of the causes of interest, which has been observed in linear parametric models. Two-step consistent estimators of the parameters of interest are proposed. We also show that the proposed estimators are consistent with a rate faster than n−1/4 under a certain metric, and the proposed estimators of the finite-dimensional unknown parameters obtain root-n asymptotic normality. Monte Carlo evidences show that the proposed estimators perform well under a variety of identification conditions. An application to instrumental variables estimation of Engel curves illustrates the usefulness of our method. It supports that correcting for both endogeneity and measurement errors on total expenditure is substantial in estimating economically meaningful Engel curves.

The Engel Curve of Owner-Occupied Housing Consumption

Housing is a major component of aggregate demand, and understanding how the demand for housing co-varies with income is useful for analysis and policy. While estimating housing consumption for tenants amounts to observing rents, estimating housing consumption for owner-occupiers is challenging because it is not directly observable and interest payments vary with re-paid principals. In order to examine the housing consumption for owner- occupiers, this article combines micro data sets on income and imputed rents for owner- occupiers based on home attributes from a consumer expenditure survey and monthly rents in a rental survey. This allows estimation of an Engel curve of owner-occupied consumption, both parametrically and non-parametrically. Regression results demonstrate that the income share of owner-occupied housing consumption decreases with income, while the Engel elasticity computed at the mean is 0.32 and increasing in income.

Household Expenditure Patterns, Equivalence Scales, and Poverty in Belarus

:This study estimates the equivalence scale for Belarus, while directly accounting for household size economies of scale. The poverty levels for vulnerable social groups are estimated using the households’ equivalized total expenditures. The change in poverty between 2006 and 2010 is evaluated. In addition, the comparison of Engel curves for several expenditure categories is conducted for this time period.

PŘÍJMOVÁ PRUŽNOST POPTÁVKY ČESKÝCH DOMÁCNOSTÍ PO MASE A MASNÝCH VÝROBCÍCH: AUTOREGRESNÍ MODEL

The paper is focused on the wider concept of the income-elasticity analysis within of the average Czechs' household demand for the meat and meat products including demand for fish and fish products. Within the investigated consumer demand, the levels of current income elasticity, dynamic income elasticity, long-term income elasticity, long-equilibrium income elasticity were evaluated. Realised demand analysis was based on the autoregressive log-linear model of Engel's curve: lnqt = −11.9878 + 1.4733lnxt + 0.1917lnqt−1 + vt, which was estimated by using the CZSO-HS data from 1995 to 2000. Developed Engel model of the quarterly demand was statistically significant (F-test, t-tests, DW-test). According to this autoregressive log-linear Engel's model, the level of the current income elasticity of the average Czechs' household demand for the meat and meat products was 1.4733. The dynamic income elasticity with quarterly lag achieved the value of 0.2825. Half-yearly dynamic income elasticity of the average Czechs' household demand for the meat and meat products obtained the value of 5.4186 · 10−2. The level of year dynamic income elasticity of examined consumer demand was 1.9915 · 10−3. In observed years (1995–2000), the applied Engel's model simulated the depression of the level of dynamic income elasticity of the average Czechs' household demand for the meat and meat products. By using the estimated autoregressive log-linear model of Engel's curve, the log-term income elasticity was studied too. Half-yearly income elasticity of the examined consumer demand achieved the value of 1.7558. The level of year income elasticity of the demand was 1.8204. The value of long-term income elasticity of the average Czechs' household demand for the meat and meat products tends to 1.8228. The determined value implies the long-equilibrium income elasticity of this consumer demand.