Back to Engel? Some evidence for the hierarchy of needs

Using UK household expenditure data spanning over four decades (1960–2000), this paper employs Engel’s needs-based approach to analyzing household expenditure patterns and finds evidence for the existence of a stable hierarchy of expenditure patterns at low levels of household income. Second, we investigate how rising household income influences the manner in which total expenditure is distributed across Engel’s expenditure categories. Our results suggest that i) total household expenditure is distributed across Engel’s expenditure categories in an increasingly even manner as household income increases and ii) over time, there has been an acceleration in the rate at which household expenditure patterns become diversified as household income rises. Finally, we consider how the shape of Engel Curves may help shed light on the relationship between goods and the underlying needs they serve.     

Nepal's civil war and the changing sources of income: The role of sectoral shifts and remittances in mitigation and recovery

Given the increased worldwide unrest and a large number of displaced individuals, understanding the economic impacts of civil war has been the subject of growing attention by academics and policymakers. The 10‐year civil war in Nepal from 1996 to 2006 provides an opportunity to assess the impact of civil unrest on income sources and remittance patterns. In this study, we examine the changes in household income generating processes over the period of the Nepali civilwar. Using survey data from the Nepal Living Standards Survey (NLSS) in 1995/1996 and 2010/2011, we observe household income and remittance patterns before and after the civil war. Specifically, we employ a difference‐in‐difference estimator that focuses on the heterogeneity in civil unrest within Nepal to examine how the civil war impacted the sources of household income. Within the context of a slower growth rate of income after the revolution for those in the hardest hit districts, we find that there was also a change in the composition of income sources. In particular, our results suggest that there was a shift from a reliance on wages in the nonagricultural sector to wages in the agricultural sector; that there was a shift from external remittances to internal remittances; and finally that home production—the market value of items produced and consumed within the household—may be taking the place of income in regions hit by unrest. “People living in zones of war are maimed, killed, and see their property destroyed. They may be displaced or prevented from attending school or earning a living. To the extent that these costs are borne unequally across groups, the conflict could intensify economic inequality as well as poverty. The destruction (and deferred accumulation) of both human and physical capital also hinder macroeconomic performance, combining with any effects of war on institutions and technology to impact national income growth. Understanding the economic legacies of conflict is important to the design of post‐conflict recovery” (Blattman & Miguel, 2010).     

Quantification and characteristics of household inflation expectations in Switzerland

Inflation expectations are a key variable in conducting monetary policy. However, these expectations are generally unobservable and only certain proxy variables exist, such as surveys on inflation expectations. This article offers guidance on the appropriate quantification of household inflation expectations in the Swiss Consumer Survey, where answers are qualitative in nature. We apply and evaluate different variants of the probability approach and the regression approach; we demonstrate that models that include answers on perceived inflation and allow for time-varying response thresholds yield the best results; and we show why the originally proposed approach of Fluri and Spörndli (1987) has resulted in heavily biased inflation expectations since the mid-1990s. Furthermore, we discuss some of the key features of Swiss household inflation expectations, i.e. the fact that there has been a shift in expectation formation since 2000 (expectations are better anchored and less adaptive, and there is lower disagreement of expectations). We suggest that this may be linked to the Swiss National Bank’s adjustment of its monetary policy framework around this time. In addition, we outline how expectation formation in Switzerland is in line with the sticky information model, where information disseminates slowly from professional forecasters to households.     

The Effects of a Consumption Tax on Effective Demand under Stagnation

This paper investigates the effects of a consumption tax on effective demand under stagnation. The existing work shows that a consumption tax does not influence effective demand in the case of a homogeneous household under stagnation. In this paper there are two types of household. One is the richer household, whose level of total assets is relatively high. The other is the poorer household, which owns fewer total assets. In a lump‐sum transfer, when the ratio of the poorer household to the total population is large (small), imposing a consumption tax decreases (increases) effective demand.     

Incorporating household production into the National Transfer Accounts for Slovenia

The National Transfer Accounts (NTA) have recently been developed to measure economic flows across age groups. In this article, we extend the NTA for Slovenia by including the value of unpaid household production. Based on time-use data, we discover that people in Slovenia spent even more time on household production than on paid work, which emphasises the necessity of including household production in the NTA analysis. We find that there are large net transfers of household production flowing from adults to children, and to a lesser extent also to the elderly. We calculate unpaid production separately for both genders, and discover that females provide much more unpaid production and total productive work than males. In addition, they face a much more intensive ‘rush hour of life’ than males. We expect that similar patterns may be found in other post-communist countries where equalising labour force participation by gender was central to the communist agenda, but where no similar efforts were undertaken to equalise household work burdens.     

Household characteristics and consumption behaviour: A nonparametric approach

In this paper we apply nonparametric methods in order to discuss some empirical aspects of household consumption behaviour. First, we study the differences in the consumption behaviour between household types. We find that, except for food, there are no clear significant differences. Secondly, we derive the functional form for the food Engel curve, using specification tests consistent in the direction of nonparametric alternatives. Finally, we use this specification to discuss the misleading conclusions that could be reached from a mechanic interpretation of the rejection of Hausman's test, when applied to test the exogeneity of expenditure. The data is obtained from the Spanish Expenditure Survey 1980–81 and 1990–91.     

Wage,income and consumption inequality in Japan, 1981–2008: From boom to lost decades

In this paper we document the main features of the distributions of wages, earnings, consumption and wealth in Japan since the early 1980s using four main data sources: the Basic Survey on Wage Structure (BSWS), the Family Income and Expenditure Survey (FIES), the National Survey of Family Income and Expenditure (NSFIE) and the Japanese Panel Survey of Consumers (JPSC). We present an empirical analysis of inequality that specifically considers the path from individual wages and earnings, to household earnings, after-tax income, and finally consumption. We find that household earnings inequality rose substantially over this period. This rise is made up of two distinct episodes: from 1981 to 1996 all incomes rose, but they rose faster at higher percentiles; from 1996 to 2008 incomes above the 50th percentile remained flat but they fell at and below the 50th percentile. Inequality in disposable income and in consumption also rose over this period but to a lesser extent, suggesting taxes and transfers as well as insurance channels available to households helped to insulate household consumption from shocks to wages. We find the same pattern in inequality trends when we look over the life cycle of households as we do over time in the economy. Additionally we find that there are notable differences in the inequality trends for wages and hours between men and women over this period.     

Household Versus Individual Valuation: What’s the Difference?

Standard practice in stated preference typically blurs the distinction between household and individual responses, but without a clear theoretical or empirical justification for this approach. To date there have been no empirical tests of whether values for say a two adult household elicited by interviewing one randomly selected adult are the same as the values generated by interviewing both adults simultaneously. Using cohabiting couples, we conduct a choice experiment field study valuing reductions in dietary health risks. In one treatment a random individual is chosen from the couple and interviewed alone; in the other treatment, both partners are questioned jointly. We find significant differences in household values calculated from joint as opposed to individual responses, with further variation between the values elicited from men and women. Our results question the assumption, implicit in common practice, that differences between individually and jointly elicited estimates of household values can effectively be ignored.      

Microfinance and gender empowerment

In this paper, we develop a theoretical model of household production, bargaining and credit to analyse how access to microcredit affects intra-household decision-making and welfare, and identify conditions under which female household members are most likely to benefit. We show that, consistent with ethnographic accounts of the impact of microcredit programmes on poor households, access to loans can lead to a variety of outcomes for intra-household decision-making and welfare depending on initial conditions and that, in some instances, women borrowers may experience a decline in welfare. We identify two instances in which a woman is most likely to benefit: when there is scope for investing the loan profitably in a joint activity, and when a large share of the household budget is devoted to household public goods.     

Evolution of U.S. Household Agency Over Stages of Capitalism

We suggest ways to explore household agency over stages of capitalism as delineated by Hyman Minsky. We make a distinction between households as institutions and going concerns. Furthermore, we delineate two levels of household agency: (i) household going concerns operating through the institution of the household, and (ii) household going concerns operating through other institutions, such as the state and the business enterprise. Those layers of household agency are especially salient in money manager capitalism, where there is an illusionary agency for most households, and where actual agency increases mostly for those households that are able to operate as agents outside of the household institution.     

In search of thresholds in the household income inequality–growth relationship

This paper investigates the shape of the relationship between household income inequality and economic growth. More precisely we search for the existence of threshold values in this relationship by employing a dynamic panel smooth transition regression model to account for potential endogeneity problems. We find that there do exist threshold values (that are different for different groups of countries): below the threshold, household income inequality is growth enhancing, while above the threshold, inequality has a negative or no effect on economic growth.     

INCOME AND WEALTH OVER THE LIFE CYCLE EVIDENCE FROM PANEL DATA

In this paper we examine household wealth and income in the Netherlands using data from the Socio Economic Panel (SEP) in the period 1987–89. We provide an evaluation of the quality of the data and some simple statistics which describe the behavior of wealth, saving, and income over the life cycle. We find there is substantial heterogeneity in the behavior of households, and wealth holdings vary substantially even among the same age group. By exploiting the panel feature of the SEP, we derive saving from first differencing wealth. We find that a sizeable fraction of households do not dissave when old and we find some evidence in favor of the bequest motive.     

Household Debt,Consumption, and Income Inequality

Using the Johansen and Engle–Granger cointegration tests, we show that there is one cointegrating relationship between household debt, consumption, and income inequality in the United States for the period from 1929 to 2009. Given this result, we use a Vector Error-Correction model to further understand the dynamics among the three variables. Results indicate that increases in income inequality and consumption directly contribute to increases in household debt. Interestingly, the results reveal some feedback from household debt to income inequality. We also show that debt-driven consumption should be viewed with caution as the results show that increases in household debt correspond with future declines in the rate of consumption.     

Nutrient consumption in India: Evidence from a village study

Adequate nutrition is generally regarded as a core dimension in any evaluation of well‐being. In the context of India, a country with a high prevalence of poor nutrition, there is a dearth of nutrition studies with adequate coverage and comparability. Using primary data on food consumption from a village in a poorer state of India, we study the consumption of five key nutrients, namely, calories, protein, carbohydrates, calcium and iron. Among the various determinants of nutrition, we find that expenditure has a significant impact on nutrition and the expenditure elasticity of nutrition is comparatively high for all the key nutrients. By correcting for potential endogeneity, we demonstrate a causal link from expenditure and food subsidy provided by the public distribution system to nutritional intake. There is some evidence that household characteristics such as household size and gender of the household head matter for nutrition; however, they are not robust under various specifications.     

Accounting for Preference and Scale Heterogeneity in Establishing Whether it Matters Who is Interviewed to Reveal Household Automobile Purchase Preferences

The choice of automobile purchases in households often involves participation of more than one household member, each of which exerts some degree of influence on the final choice outcome. The influence of more than one agent has been recognised for many years, and yet the majority of automobile choice studies develop choice models as if a single agent is involved in the preference revelation process. What is not clear is whether it makes any substantive difference in preference revelation according to who is interviewed in a household. Using a generalised mixed logit framework that accounts for preference and scale heterogeneity, we estimate a series of models to investigate whether there are significant differences between the preferences of each individual in a household when assessed in isolation from other household members, as well as their joint preferences when expressing their preferences through a group choice task. The context is choosing amongst petrol, diesel and hybrid fuelled vehicles (associated with specific levels of fuel efficiency and engine capacity) when faced with a mix of vehicle prices, fuel prices, fixed annual registration fees, annual emission surcharges and vehicle kilometre emission surcharges. Using a stated choice experiment, we find that sampling a single individual as a representative of the household’s preferences is less appropriate than utilising preference information from the relevant group of decision makers in the household.     

The Demand for Food Products: An Analysis of Interpurchase Times and Purchased Quantities

In this paper we study household purchase behaviour of storable food products. An inventory model is developed in which the household chooses an optimal stock level of the product. Storage of the product is costly, there is a fixed cost per purchase occasion, and the market price is sometimes discounted because of price promotions. We show that the optimal purchase policy is an s , S policy. The model is used to derive predictions on the correlations between interpurchase times and purchased quantities on the one hand, and prices on the other. These predictions are empirically verified using consumer panel data.     

A BOUNDED INDEX TEST TO MAKE ROBUST HETEROGENEOUS WELFARE COMPARISONS

Fleurbaey et al. (2003) develop a bounded dominance test to make robust welfare comparisons, which is intermediate between Ebert's (1999) cardinal dominance criterion—generalized Lorenz dominance applied to household incomes, divided and weighted by an equivalence scale—and Bourguignon's (1989) ordinal dominance criterion. In this paper, we develop a more complete, but less robust bounded index test, which is intermediate between Ebert's (1997) cardinal index test—an index applied to household incomes, divided and weighted by the equivalence scale—and a (new) sequential index test—an index applied to household incomes of the most needy only, the most and second most needy only, and so on. We illustrate the power of our test to detect welfare changes in Russia using data of the RLMS-surveys.     

Carbon-reducing taxes and income inequality: general equilibrium evaluation of alternative energy taxation in Taiwan

Recently, several studies have been a detailed evaluation of the economic implications of energy taxation as a policy instrument to conserve energy and reduce carbon emissions. However, little attention has been devoted to inquiring about the economic implications of energy taxation in the newly industrialized countries (the so-called NICs). In this paper, we use a multisector, multihousehold computable general equilibrium model to assess the distributional effects of alternative energy taxation on the Taiwan economy. The counterfactual simulation technique is applied to investigate the income distribution implications of: (1) an increase in the import taxes of crude oil; and (2) an increase in the excise taxes of petroleum products. Our empirical results basing on Taiwan's data show that both energy taxes increase government revenue and the Gini coefficient, but reduce net value-added, private consumption, disposable income and equivalent variation. A raise in the Gini coefficient implies that there is a worsening in the distribution of income. The lowest income group suffers relatively large welfare and income loss, but the highest income group suffers a relatively small welfare and income loss. The distributional effects differ from household to household depending on the composition of their total consumption and the source of their factor income. Our findings reveal that the energy tax appears to be mildly regressive, there are broadly consistent with those cases of developed countries reported in previous studies.     

Malnutrition and Child Labor

In pre‐industrial and developing economies, it is common to find (i) entire families, including children, working together in family farms or urban factories; and (ii) a positive link between a person's consumption and her productivity. This paper argues that there is a natural reason for the concurrence of (i) and (ii). As a rule, households are characterized by intra‐household altruism: an increase in the income of an individual increases the consumption of all household members. Hence, when an employer pays an adult worker a high wage to enhance her productivity, part of it ends up augmenting her children's consumption and productivity. One way for the employer to prevent this leakage and internalize the externality is to employ the children as well. This explains the higher incidence of family labor in poor societies where (ii) is more likely to be true.     

Pareto improving financial innovation in incomplete markets

Summary. In this paper we develop a differential technique for investigating the welfare effects of financial innovation in incomplete markets. Utilizing this technique, and after parametrizing the standard competitive, pure-exchange economy by both endowments and utility functions, we establish the following (weakly) generic property: Let S be the number of states, I be the number of assets and H be the number of households, and consider a particular financial equilibrium. Then, provided that the degree of market incompleteness is sufficiently larger than the extent of household heterogeneity, S−I≥2H−1 [resp. S−I≥H+1], there is an open set of single assets [resp. pairs of assets] whose introduction can make every household better off (and, symmetrically, an open set of single assets [resp. pairs of assets] whose introduction can make them all worse off ). We also devise a very simple nonparametric procedure for reducing extensive household heterogeneity to manageable size, a procedure which not only makes our restrictions on market incompleteness more palatable, but could also prove to be quite useful in other applications involving smooth analysis. Received: August 14, 1995; revised version: April 14, 1997