Estimates Of Income Elasticities Research Articles

Income Elasticity of Out-of-Pocket Healthcare Expenditure for Different Provider Types in Bangladesh.

The impact of income on health expenditure has been studied extensively using national-level data; however, studies estimating the household-level income elasticity of health expenditure, particularly by provider types, remain limited. Analysing nationally representative household survey data, we examine outpatient and inpatient out-of-pocket (OOP) expenses across healthcare providers and by various income levels. We employed the Heckman two-step model and OLS regression to estimate income elasticity separately for outpatient and inpatient services. Our findings indicate that income elasticity varies significantly by service type, provider, and income level. Outpatient care at private facilities is a luxury good for the lower-income households, while outpatient expenses for public and informal outpatient care providers remain inelastic across income levels. Private inpatient care is also income inelastic, whereas public inpatient care shows non-uniform elasticity. Overall, lower-income households showed greater elasticity than wealthier ones. The results imply, during income shocks, poorer households switch to cheaper public and informal care. Inpatient care is prioritised over other expenses, increasing the risk of poverty among low-income households. The study suggests the dire need for financial protection measures, particularly for low-income groups, as OOP health expenditure often becomes catastrophic for those households. In addition, higher income resulting from economic growth will increase the demand for private outpatient services, suggesting quality improvement for public health facilities as well as the importance of adapting healthcare policies to evolving income dynamics.

Citrus greening, retail fruit prices, and household welfare: A demand system approach

Abstract Pests and diseases like citrus greening that threaten agricultural productivity also pose a risk to consumers. Reductions in food supply due to outbreaks and spread could increase food prices. We model U.S. household fruit demand using a Quadratic Almost Ideal Demand System and data from Circana’s 2020 and 2021 household panel. Price and income elasticity estimates reveal how household behavior might adjust with shocks to citrus and other fruit prices. Shocks to retail fruit prices can be from either citrus greening or other phenomena such as adverse weather. We also use compensating variation to estimate the impact that changes in fruit prices could have on consumer welfare.

A novel suggestion on how to adequately treat stochastic non-stationary seasonality in tourism export forecasting

Using a quarterly data sample of 28 EU countries ranging from 2004Q1 to 2016Q4, real tourism exports are modeled and estimated as a function of relative tourism export prices and aggregate real GDP. For almost all countries, HEGY tests applied to first-differenced variables cannot reject the null hypothesis of the presence of seasonal unit roots. Seasonal differencing would be necessary to remove the seasonal patterns from the data, yet employing seasonally differenced data results in information loss, distorted elasticity estimates, and mediocre forecast accuracy. Our suggestion is therefore to perform estimation and forecasting for each quarter separately. This approach avoids the use of seasonal differencing, results in plausible, seasonally varying estimates of income elasticities, and yields statistically significantly superior forecast accuracy, also in comparison to two data-driven benchmarks for seasonal data (i.e., SARIMA and ETS).

The demand for sparkling wine: insights on a diversified European market

PurposeThe article aims to study the demand for sparkling wines in Europe. The main objective is to estimate the classic demand parameters aggregately for the entire European area (European Union and the United Kingdom) and separately for groups of countries characterized by wine markets with similar characteristics.Design/methodology/approachUsing 15-years market data for different wine categories from the Euromonitor Passport database, the estimation of price and income elasticities is performed through a Quadratic Almost Ideal Demand System. In line with the objectives, the model is applied first to the whole European area and then separately to the considered groups of countries (subareas). To identify homogeneous subareas, a cluster analysis was performed on basic characteristics of the wine market.FindingsWhen considering the European market as a whole, sparkling wines should be considered a luxury category with a high own-price elasticity. However, the structure of their demand is rather different in different sub-areas. The observed heterogeneity suggests that differentiated policy and marketing considerations should be made. In addition, it widens the possibilities for producers, who can choose the submarkets that respond best to their needs to export their sparkling wines. This seems particularly important in markets, like the sparkling wine ones, that are experiencing a continuous expansion over the last decades.Originality/valueDespite using a methodology well-established to study wine and alcohol demand, the study fills a considerable gap in the literature. Although the demand for sparkling wine is growing worldwide, so far only a couple of studies have engaged in the analysis of its structure. In Europe, the largest market for sparkling wine, this kind of studies is completely lacking.

Political Language in Economics

Abstract Does academic writing in economics reflect the political orientation of economists? We use machine learning to measure partisanship in academic economics articles. We predict the observed political behaviour of a subset of economists using phrases from their academic articles, show good out-of-sample predictive accuracy and then predict partisanship for all economists. We then use these predictions to examine patterns of political language in economics. We estimate journal-specific effects on predicted ideology, controlling for author and year fixed effects, that accord with existing survey-based measures. We show considerable sorting of economists into fields of research by predicted partisanship. We also show that partisanship is detectable even within fields, even across those estimating the same theoretical parameter. Using policy-relevant parameters collected from previous meta-analyses, we then show that imputed partisanship is correlated with estimated parameters, such that the implied policy prescription is consistent with partisan leaning. For example, we find that going from the most left-wing authored estimate of the taxable top income elasticity to the most right-wing authored estimate decreases the optimal tax rate from 77% to 60%.

Elasticities of Passenger Transport Demand on US Intercity Routes: Impact on Public Policies for Sustainability

Passenger transport is a key sector of the economy, and its sustainability depends on achieving the greatest possible efficiency, avoiding problems of congestion or underuse of infrastructures, and reducing the sector’s environmental impact. Knowing the elasticities of demand is critical to achieving these objectives, estimating the intensity of transport demand, and predicting the effect of different policies on reducing greenhouse gas emissions. This research proposes a relatively simple model for estimating and predicting the elasticity of demand for different modes of transport at the route level. This model could be used by companies and public management to obtain a vision of the different analysed routes and the pressure of their demand, as well as a relative perspective of each of them. Such a model is used to estimate the price and income demand elasticities of passenger transport modes in domestic routes in the United States (2003–2019), where there is competition between road, rail, and air transport. Series of passenger numbers, fares, and budget shares are reconstructed from the available data. A Rotterdam demand model (RDM) is estimated using a seemingly unrelated regression method (SUR). The estimated income elasticities imply that demand for road transport increases somewhat more proportionally than the increase in income, somewhat less than proportionally for air transport, and with very low proportionality for rail transport. This indicates the need to target investment and service improvement efforts, as well as technological solutions, according to this difference in demand pressures. Finally, the demand response of the three modes of transport to price increases is inelastic, and there is little or no pass-through from one mode to another. This implies that fiscal or carbon pricing actions could have a very limited impact and high social costs. Again, strategies based on investments in technological progress, infrastructure development, and normative interventions could be more effective.

Climate concern elasticity of carbon footprint

The income elasticity of carbon footprint is a summary variable often used to describe the relationship between income and carbon footprints. Previous studies primarily calculate this elasticity using emissions intensities per monetary unit. However, this study is based on a survey conducted in Nordic countries which allows us to directly calculate carbon footprints from responses about quantity and types of activities instead of from spending. As a result, we curtail an inbuilt relationship between income and carbon footprints. As a result, our method produces an income elasticity estimate that is approximately one-fourth of the highest estimates that exist, and 30% lower than the smallest current estimate. Furthermore, we introduce a new summary variable called the climate concern elasticity of carbon footprint. This variable provides a simple method to analyze the relationship between pro-climate attitudes, pro-climate behavior, and carbon footprints. This new parameter can serve as a framework that identifies key areas where the investigation of the relationship between people’s climate concern and their carbon footprint may be most useful. This framework and improved knowledge of income elasticities can guide policymakers and future research and provide new methods to estimate carbon footprint distributions.

Estimation of income and price elasticities of Indian electricity demand

This study is the first to analyse Indian electricity demand at both the aggregate and sectoral levels between 1981 and 2020. We use a novel autoregressive distributed lag (ADL) cointegration test in the presence of unknown structural breaks. While the income elasticity is close to one in the residential and industrial sectors, it is greater than one in the aggregate and commercial sectors. These results reveal that economy-wide electricity intensity rises with economic expansion in India. The price elasticity is negative and smaller than one in absolute value in the aggregate sector (−0.66), the residential sector (−0.83), and the industrial sector (−0.63), but it is statistically insignificant in the commercial sector. These estimates allow us to provide sector-specific information for policy design and implementation in the power market.

ANALYZING HOUSEHOLD DEMAND FOR ANIMAL FOOD AS A SOURCE OF PROTEIN: THE CASE OF RURAL GORONTALO PROVINCE, INDONESIA

Animal foods are a major source of protein for households. Gorontalo Province has a lot of potential for marine fishery development, despite being one of the provinces where families consume less protein than the national protein sufficiency rate. This article investigates the household elasticity of demand for animal food in the context of increasing prices and incomes. The Quadratic Almost Ideal Demand System is used in to estimate the share equations from which reliable price and income elasticities can be derived. The article utilizes secondary data from the National Socio-Economic Survey for March 2021, which includes consumption and household expenditure information on all animal protein-containing meals, 4,811 households make up the study's sample. All animal foods, except for eggs, were found to be highly price elastic. The most elastic food is beef, which has a demand elasticity of 3.829%, followed by chicken meat (3.13%), fish (2.345%), milk (1.311%), and eggs (0.846 percent). Eggs were discovered to be price inelastic. Except for eggs, all animal products are considered luxury goods as indicated by income elasticity estimates. Beef has the highest income elasticity (3.181%), followed by chicken (2.957%), fish (1.674%), and milk (1.574 percent). Eggs are normal items because their income elasticity is the lowest at 0.589 percent. This finding confirms that for households in rural Gorontalo, price policy is more effective than income policy.

Pooling my personal account: Income responses to the payroll tax in China

Developing countries collect not only a far lower share of GDP in taxes, but also less payroll taxes than rich countries. This paper explores income responses to the payroll tax by evaluating the 2006 pension reform that subtracted 3 percentage points of employees' Defined Contribution account in China. First, our estimate of total income elasticity with respect to the pension rate is larger than 2, implying a lower optimal payroll tax rate than in rich countries. Second, we separate total income into labor and non-labor income, and show significant income shifting from labor to non-labor income. Third, we provide suggestive evidence that income responses to the pension reform are from evasion rather than real responses. We emphasize the necessity of administrative capacity for developing countries to extend the pension system. Remarkably, sharing the employer payroll tax with employees may be a self-enforcement mechanism, similar to the value-added tax, of the payroll tax.

Progress on Poverty in Africa: The Importance of Growth and Inequality

AbstractEmploying World Bank data, this paper, first, historically examines Africa's record on poverty incidence, spread and severity, as compared with other regions of the world, at the US$1.90 and US$3.20 per day (2011 PPP) poverty standards. Second, it evaluates country-specific progress on growth, poverty and inequality, and compares the ‘poverty transformation efficiency vector’ (PTEV) among African countries. Third, the study analyses the relative roles of income growth and inequality changes in explaining African countries' poverty records, through a decomposition of poverty changes using ‘optimal’ income and inequality elasticity estimates from the ‘identity’ model. The study finds that following the dismal record on poverty during the 1980s, progress on poverty has been appreciable since Africa's growth resurgence starting in the mid-1990s, and that this progress was driven mainly by income growth, consistent with the global evidence. Nonetheless, inequality often played a complementary role in most of the countries and, in a small number of cases, it was the primary driver of changes in poverty. Thus, the present study sheds light on country-specific differences in the relative roles of growth and inequality in poverty reduction on the continent, based on both qualitative and quantitative evidence. The study should, therefore, provide a useful compass to those who seek to understand country-specific situations within the African context.

Modeling final energy demand and the impacts of energy price reform in Saudi Arabia

We model energy demand across five end-use sectors and 15 energy products in Saudi Arabia, generating comprehensive price and income elasticity estimates. Using the Structural Time Series Model, we demonstrate that the trends underlying energy demand are generally stochastic, underscoring the importance of using such models for estimating unbiased elasticities. Our estimates reveal that energy demand in Saudi Arabia is price inelastic in all cases and income inelastic in most cases, with industrial natural gas and electricity being the only exceptions. Nevertheless, we find extensive variation in the elasticities across sectors and energy products, highlighting the importance of using sector- and product-specific elasticity values and not assuming they are similar in the same country. We then use our estimated elasticities to conduct a welfare analysis of the energy price reforms implemented in 2016 and 2018. Our analysis reveals that the 2016 reform delivered a total annual welfare gain of 11.6 billion 2010 United States Dollars (USD) in 2016. Following the 2018 reform, the annual welfare gain increased to 17.0 billion 2010 USD in 2018. We also estimate the cumulative carbon dioxide emissions avoided between 2016 and 2018 due to energy price reform at 164 million tonnes.

Energy efficiency as a sustainability concern in Africa and financial development: How much bias is involved?

This study contributes to the literature on whether financial development stimulates technical energy efficiency (TEE) or not, by addressing core biases that creep into the relationship and thereby reducing the ability to draw causal inferences from financial development to TEE. Our approach is based on the instrumental stochastic frontier technique, where biases in the frontier and inefficiency equations are dealt with using external instrumental variables. The legal system origin of the country and life expectancy at birth were used as instruments for financial development and income, respectively. The current study demonstrates substantial bias in income elasticity, the estimate of energy efficiency, and the effect of financial development on energy efficiency. Both income elasticity and energy efficiency estimate risk upward bias. Equally, the effect of financial system development and financial institution development on TEE risk downward bias. Other results show that all aspects of financial institution development stimulate TEE, but access to financial institutions is more important. These results raise caution about future studies' estimates of the effect of financial development on TEE. Though this study has demonstrated the potency of external instruments in dealing with the bias in the coefficient estimates, we consider this might prove to be a luxury solution in some cases due to data limitation, context differences, and theory. In those circumstances, reliance on internal instruments might prove to be the second-best option.

The change in household consumption patterns in Jordan: 1997–2017

This study aims to determine the change in consumption patterns of the Jordanian household during 1997–2017, as well as to estimate the income elasticities. The data from the household expenditure and income surveys conducted by the Jordanian Department of Statistics in the years: 1997, 2006, 2008, 2010, 2013, and 2017 were used. Graphs were prepared and percentages were calculated to measure changes in household consumption patterns. The average household expenditure index was used to measure the impact of income on changing consumption patterns (Selim, 2014). To estimate income elasticity, a pooled data regression model was adopted (Sugiarto & Wibowo, 2020). The estimated model is statistically significant at a level of 0.05. The study found a decrease in the percentage of household spending on the food group and an increase in the percentage of spending on the non-food group during the study period. This change in the family’s consumption pattern coincided with an increase in its income. Value of income elasticity was < 1 for food, clothing, and housing. It was > 1 for transportation and communication, education, and health. Therefore, we conclude that the consumer behavior of the Jordanian family is fully consistent with the theory of consumer behavior and its applications.

반려동물 관련 소비지출에 대한 경제학적 분석 : 소득탄력성 및 자녀와의 대체·보완관계 추정

우리사회에서 반려동물은 가족 구성원으로 인식되고 있으며, 최근 반려동물 시장에 대한 국내외적 관심은 더욱 확대되고 있다. 코로나19 팬더믹에도 불구하고 반려동물 관련 시장은 더욱 성장할 것으로 예상되는 가운데 반려동물 관련 지출은 다양한 사회현상과도 맞물려 있어, 이에 대한 사회과학적 논의가 필요한 시점이다. 본 연구에서는 경제학적 관점에서 반려동물 관련 소비지출의 소득탄력성과 자녀와의 대체•보완성을 분석하는 것을 목적으로 한다. 실증분석을 위해 재정패널(NaSTaB) 10-14차(2017~2021년) 자료를 활용하고 분석방법은 반려동물 지출의 중도절단이 있는 경우를 고려하여 멀티레벨 토빗모형을 사용하였다. 실증분석 결과 배우자가 있는 가구의 경우 반려동물 지출의 소득탄력성이 1보다 작지만 배우자가 없는 가구에서는 소득탄력성이 1보다 큰 것으로 추정되었다. 만 18세 미만 미성년자 수와 반려동물 관련 소비지출은 음의 관계(-)로 추정되어 반려동물 양육과 미성년자 자녀 간에 대체성이 있음을 확인할 수 있었다. 저출산•고령화 및 1인 가구의 확대 속에서 우리 사회 다양한 분야에서 반려동물 지출 관련 논의의 필요성이 커지는 가운데, 본 연구는 반려동물 관련 지출을 경제학적 관점에서 분석하였다는 데 그 의의가 있다.

Is survival a luxury good? Income elasticity of the value per statistical life

The value of a change in mortality risk is conventionally described by the marginal rate of substitution between income and mortality risk–the value per statistical life (VSL). The income elasticity of VSL is important for estimating how the value of mortality risk varies with time (for evaluating programs with long-lived effects) and across populations with different income levels (for evaluating programs with international consequences). Previous estimates of income elasticity based on meta-analysis of wage-differential studies and cross-sectional comparisons in stated-preference studies suggest values between about one-half and one. We present new estimates based on a 16-year series of wage-differential estimates in Taiwan. Between 1982 and 1997, estimated VSL increased by a factor of five while household labor earnings increased by 60 percent, per capita GDP increased two-and-a-half fold, and the occupational fatality rate in manufacturing and service industries decreased by half. Comparing the growth of VSL with that of household income implies the income elasticity is between about two and five, but this estimate may be biased by the endogeneity of VSL, which is affected by workers’ job choices. Using a two-stage approach to control for endogeneity yields estimates of the income elasticity of VSL between two-thirds and one, consistent with estimates from other approaches.

The daily price and income elasticity of natural gas demand in Europe

Data from 15 European countries is analysed to provide novel estimates of daily own-price, cross-price and income elasticities of natural-gas-demand from 2016 to 2020. The results show that: first, there is a strong-seasonal component in the October–February period during which residential-demand has a higher share on total demand, and gas price is not a determinant factor for most of the countries. This seasonal profile makes price-based tools more effective modifying end-consumer behaviours from March to August when estimated own-price elasticities present larger values in absolute terms. Second, there are estimated positive own-price elasticities from October to February in Bulgaria, Luxemburg, Poland, the UK, and Portugal. The first four countries present natural gas prices below the EU-28 average during the analysed period and it is argued that positive elasticities may reflect a disconnection between the price traded on the organized markets and the real price perceived by end-customers. For Portugal, who is currently carrying out a very aggressive policy to become coal-free by the end of 2021, natural gas and coal are mainly consumed in power sector to provide flexibility and back up renewable generation. The limited alternatives to provide these services may explain why coal and natural gas are found to be complementary. Finally, it is found that lockdowns due to covid-19 highly impacted on natural gas demand, confirming for the first time in the literature a “double heating effect”. Our results help to find when price-based tools by policymakers will influence more effectively natural-gas-demand following economic and environmental goals.

Rural area and agricultural region revitalisation modelling

AbstractComparing the per capita incomes of urban and rural households reveals a sizable income disparity in the latter, as well as an uneven distribution of income across China's regions. This article discusses and ranks the drivers that affect rural development. Among the most critical are farmer support factors, transportation infrastructure development, information and communication technology development, and rural entrepreneurship. The decline in the Engel coefficient, which reflects changes in welfare and income elasticity estimates of food demand, and income elasticity itself, indicates that food demand for Chinese farmers has become extremely inelastic. The ranking of China's regions in terms of per capita income growth shows that the intended policy of wealth equalisation of the country's population is being followed. The objective is to modernise agriculture and reduce regional disparities for China to achieve the status of a moderately developed country shortly, which will require state assistance. The emphasis is on farmer welfare, rural areas, and agriculture. In the face of massive population densities, regional disparities, and vast heterogeneous territory, the land consolidation practice is demonstrated in various regions as a platform and lever for rural life revitalisation. Rural tourism development is defined as a means of generating additional jobs and ensuring the long‐term viability of villages. The rural elite's decisive role in leading the agricultural sector's restructuring is emphasised. Central and local governments can use the results to strengthen the legislative framework, develop plans and programmes, and identify rural development models.

Price and income elasticity of natural gas demand in Europe and the effects of lockdowns due to Covid-19

We analyse a panel of 25 European-countries to provide novel estimates of monthly own-price, cross-price, and income elasticities of natural-gas-demand from 2005 to 2020. We find that: first, there is an European Standard Behaviour (ESB) with a strong-seasonal component. Second, we identify three different patterns from the ESB: 1) France, Denmark and Estonia present slightly positive elasticities in the short-run and a lack of sensitivity to own-price variations in the long-run –we argue this phenomenon is due to a higher weight of heating demand-. 2) Latvia presents a lower sensitivity to own-price variations than the ESB -we argue due to the role of natural gas as a unique backup technology in the power sector-. 3) In Portugal, natural gas showed the highest own-price elasticities – we argue that natural gas is used mainly in the power sector with substitutive technologies-. Finally, we find that Covid-19-lockdowns highly impacted natural-gas-demand, confirming the “double-heating-effect”.

Demand Analysis for Cereal Crops in Ethiopia

Cereals are common in Ethiopian diets, but the people’s consumption habits are complex, with no single crop dominating. Empirical analysis of cereal crop household demand is required to quantify household responses to cereal crop value changes and individual income changes. A purpose of this study is to assess demand for major cereal crops in Ethiopia using secondary data from Ethiopian Social Economic Survey 2018/19 (ESS) with 1700 households of cereal-growing consumers. This paper utilises descriptive statistics and Almost Ideal Demand System (AIDS) model to estimate demand parameters for major cereal crops. The empirical results showed that crop prices themselves, prices of other crops and demographic factors influence the share of grain expenditure. The estimated income elasticity of all sampled cereals is positive, and the Marshallian (unpaid) price elasticity is elastic while the compensated cross-price elasticity was inelastic. Household response to cereal crop demand decreases as commodity prices rise. Teff was the most price-sensitive commodity and classified as a luxury good because its income elasticity value was greater than one. Wheat, maize, and sorghum were designated as necessities, and all of the cereal crops studied in this work are considered normal goods. According to the study, the magnitude of price elasticity is greater than the expenditure elasticity of cereal crops. This implies that price has a greater influence than income. As a result, price regulation policies would be more effective than income targeting policies. Furthermore, the positive expenditure elasticity suggests that as income rises, so will demand for cereal crops. Policies aimed at increasing income would increase demand for cereals.