A cross-country analysis of consumption patterns

This paper uses the system-wide approach to analyse the consumption patterns in 18 OECD countries. The results show that, on average, the OECD per capita consumption increased by 3% per annum and prices increased by about 7% per annum; OECD consumers spend about half of their income on food, housing and transport. It is also shown that, in most OECD countries, food, housing and medical care are necessities and clothing, durables, transport and recreation are luxuries, and that the demand for all goods considered are price inelastic. The controversial hypothesis of Stigler and Becker (1977) that tastes are the same across countries is also tested and it is found that the OECD consumption data do not support their claim.     

Understanding consumption patterns

The analysis of consumer demand is one of the major successes of economics as it represents the near perfect marriage of theory and econometrics. This paper reviews, distills and systematises some of the major empirical findings on consumption patterns, concentrating in particular on the more recent (and, in some cases, more controversial) evidence. One of the key conclusions of the paper is that on the basis on new methods, the hypotheses of homogeneity, symmetry and preference independence are not at such wide variance with the data as was once thought to be the case.     

Unemployment and consumption patterns

In this paper we obtain empirical evidence about the effect of female and male unemployment on household demand of a selection of goods and services. We analyse the percentage of the family income expenditure on a particular group of goods concerning education, domestic services, leisure goods, hotels etc. The impact of several determinants on each group of commodities is estimated using a Tobit specification. The data used for estimation have been taken from The Household Expenditure Survey (1990–91). Our main result is that male and female unemployment has a different impact on the household consumption.     

Comparing international consumption patterns

When attempting to identify empirical regularities in consumption patterns, their tremendous diversity across countries represents both a major opportunity and challenge. For example, consumers in rich countries devote less than 20% of their budget to food, while this rises to more than 50% in the poorest countries. This paper uses a major new database released in Selvanathan and Selvanathan (Selvanathan EA, Selvanathan S (2003) International Consumption Comparisons: OECD versus LDC. World Scientific, Singapore) to explore several related issues, including the extent to which the consumption basket is diversified and how this changes with income, whether a simple utility-maximising model is capable of explaining the diversity of consumption patterns internationally, the measurement of the extent to which tastes differ across countries, and how the world can be partitioned into groups of countries with minimal within-group heterogeneity of tastes on the basis of the revealed preference of consumers.

Cross-country prediction of changes in consumption patterns

Changes in consumption patterns in 16 countries from 1970 to 1973 are predicted in a cross-sectional context. The method is successful (in the sense that it beats no-change extrapolation of budget shares) for the U.S. and six Western European countries, but it is not successful for most countries outside the North-Atlantic region.     

A regional analysis of food consumption in China

Two “laws” are used to describe the budget shares of staple food, other food, and non-food in 28 regions in China: Working's model, which describes the budget share of (total) food as a declining linear function of the logarithm of total consumption expenditure, and a second model that describes the ratio of the budget shares of staple and other food as a double-log function of total consumption expenditure. Staple food appears to be an inferior good in the richest regions but not in the other regions.     

Empirical regularities in South African consumption patterns

This article investigates a number of empirical regularities in the South African consumption patterns. The data support the following empirical regularities: (1) variability in consumption systematically exceeds the variability in prices; (2) law of demand; (3) income flexibility is about ?0.5; (4) Engel's law; and (5) the demand hypotheses, demand homogeneity and Slutsky symmetry are acceptable. In contrast to the findings for a number of other countries, another important empirical regularity that consumer's utility function is additive is rejected for the South African consumers. Based on the implied demand elasticity estimates from the preferred model, it is found that food, housing and medical care are necessities, and clothing, furniture, transport and recreation are luxuries and demand for all the commodities are price inelastic.     

Meat and fish consumption patterns in Saudi Arabia

This study analyses the demand for meat (beef, chicken and lamb) and fish in Saudi Arabia in a system-wide framework using data for the period 1985–2010. A preliminary data analysis reveals that, in Saudi Arabia, the relative consumption of beef, chicken and fish has a positive growth, while lamb has a negative growth. The average relative price growth rates of beef, chicken and fish are negative, while that of lamb is positive. The expenditure shares of beef, chicken and fish have increased while that of lamb has fallen. The estimation results of the demand system reveal that there is an autonomous trend out of lamb into beef, chicken and fish. The implied income elasticities indicate that beef, lamb and fish are considered to be luxuries, while chicken is a necessity. The demand for all meat products and fish are price inelastic. These elasticities are key inputs for policy analysts in terms of devising policies in relation to meat production, meat imports, taxation and food security issues in Saudi Arabia. The usefulness of the implied elasticities is demonstrated by simulating the consumption of beef, chicken, lamb and fish under various policy scenarios.     

Diversity, persistence and chaos in consumption patterns

In this paper we present a model from which discretionary consumption dynamics can be analyzed as global properties emerging from the endogenous transformation of a society inhabited by boundedly rational interactive consumers. By considering local and global interactions among consumers, we show that behavioral diversity plays a central role in the evolution of consumption patterns. The analysis of the model reveals the existence of a regime characterized by the persistence of different social standards, and a time evolution of the social distribution of behavioral patterns towards a heteroclinic cycle. In some cases the evolution seems to be chaotic, generating unpredictable, erratic dynamics of the aggregate social indices (average or social propensity for discretionary consumption).      

Modelling Sri Lankan consumption patterns using error corrected LA-AIDS

Static-demand systems used in empirical studies are based on the assumption that consumers immediately and fully adjust to a new equilibrium when either incomes or prices change. In reality, consumers are unlikely to have adjusted to equilibrium in each time period and the assumption of instantaneous adjustments by consumers is potentially incorrect. The dynamic modelling approach allows for intertemporal rationality of consumer behaviour by explicitly considering the mechanism underlying the short-run adjustment process. This study, while considering the traditional static Almost Ideal Demand System (AIDS), in addition, considers two dynamic versions of the AIDS to model the dynamic behaviour of Sri Lankan consumers in consuming eight broad commodity groups using data during the period 1963–2016. The estimated results indicate that all commodities have price inelastic demand in both the short and long run. The differences between short- and long-run demand elasticities indicate the need to adopt a dynamic approach in estimating demand elasticities, because the income and price elasticities are key inputs for policy analysis in economy-wide modelling.     

A dynamic analysis of expenditure patterns in rural India

Recent generalisations of the Linear Expenditure System have concentrated on its restrictive assumption of separable preferences but underplayed its equally restrictive assumption of linearity in income, i.e., constant marginal budget shares. This reflects the data base which has usually been long time series of disaggregated consumer expenditure data. Such generalisations are inappropriated for developing countries which rely on highly aggregated commodity expenditure data from budget surveys with more variation in income responses is introduced, variation in prices. A general procedure for non-linearising income but rather limited applied to some recent LES generalisations to generate still further geenralisations and then used to analyse rural India's expenditure behaviour. The results decisively support the suggested generalisation and, also, provide evidence in favour of dynamic behaviour and habit persistence on budget data.     

Structural breaks in consumption patterns: India 1952-1991

This study improves upon the econometric modelling for testing and incorporating structural breaks for a study on Indian consumption patterns covering a period of four decades and also explores the causes of such breaks. The tests for structural breaks in consumption patterns indicate multiple break points which are not uniform across the population groups and also across commodity groups. Further, the results indicate for the first time, that the breaks could often be induced by the changes in the data collection methodology of the survey and not due to changes in consumer behaviour alone. Apart from this, there is a shift in the consumption pattern during the mid-1980s in both the rural and the urban sectors. For the lowest expenditure class the shift is away from food items with the rural sector showing a change in the price response and the urban sector showing a change in the total expenditure coefficient. For the middle and the upper expenditure classes the shifts are not only from the food items towards non-food items but also from the 'food' group that includes items like cereals, milk and milk products towards the 'other food' group which includes items like vegetables and fruits. Its causes are found to be changes in preferences as well as the income effect.     

Convergence of consumption patterns during macroeconomic transition: A model of demand in Ireland and the OECD

This study uses country-level panel data on consumption in Ireland and seven other OECD countries to examine the evolution of Irish consumption patterns as Ireland underwent rapid macroeconomic growth. Consumption levels obviously increased due to substantially higher incomes, but it is less clear how the shares of different types of goods purchased have changed or whether Ireland's consumption mix has converged with that of other high-income countries. Rankings based on a simple distance measure of consumption similarity suggest that Ireland moved from a “low-income” pattern similar to Portugal or Greece to a “high-income” pattern like that of Canada between 1995 and 2003. Using static and dynamic Almost Ideal Demand System models, we first estimate long- and short-run Irish price and income elasticities for nine categories of commodities between 1976 and 2003. These results provide evidence of substantial habit formation in aggregate consumption. We then estimate a long-run cross-country model covering six aggregate commodity groups between 1975 and 2003. The analysis shows that Ireland's demand parameters remain more similar to those of Greece than to higher-income OECD countries in the sample. Although Ireland has overtaken most other OECD countries in per capita income, it is still converging to a higher-income consumption pattern. We foresee further convergence of Irish expenditure patterns towards a pattern typical of high-income countries.     

Chaotic consumption patterns in a simple2-D addiction model

Summary.  Consumption fluctuations in a simple 2-D addiction model are investigated. The behavioural equations of the model are suggested by a related ‘rational addiction’ model of Becker and Murphy [2]. Our model generates erratic, seemingly unpredictable consumption patterns of the addicted persons. The occurence of chaos is proven by locating a so called horseshoe map in the phase space. Received: April 4, 1994; revised version March 25, 1996     

Seasonal cointegration analysis of German consumption function

The main purpose of this paper is to investigate the West-German consumption process depending on wealth and income with seasonal cointegration techniques using the framework of vector autoregressive models to capture the seasonal pattern of the series. The vector autoregressive models are the basis of a dynamic analysis by impulse response functions where the asymptotic distributions of the estimators are given. In the empirical part of the paper evidence is found for seasonal and nonseasonal cointegration relations among the variables. The response functions of consumption and income show a strong influence of wealth innovations. Moreover, income and consumption reactions present outstanding seasonal pattern.     

A robust analysis of the relationship between renewable energy consumption and its main drivers

We provide a comprehensive and robust analysis of the drivers of renewable energy consumption for a panel of 64 countries, using both the static (Pooled OLS, Panel Fixed and Random Effects) and dynamic (difference and system GMM) panel data estimation approaches. We show that the dynamic panel data model provides more efficient estimators than the static ones and that increases in per capita CO₂ emissions and per capita trade with foreign partners mainly drive the changes in per capita renewable energy consumption. We also find limited evidence of oil price effects on renewable energy consumption, which reflects the fact that renewable energy is just a complement and not a perfect substitute of crude oil, at least in the short run.     

Global patterns of socioeconomic biomass flows in the year 2000: A comprehensive assessment of supply, consumption and constraints

Human use of biomass has become a major component of the global biogeochemical cycles of carbon and nitrogen. The use of land for biomass production (e.g. cropland) is among the most important pressures on biodiversity. At the same time, biomass is indispensable for humans as food, animal feed, raw material and energy source. In order to support research into these complex issues, we here present a comprehensive assessment of global socioeconomic biomass harvest, use and trade for the year 2000. We developed country-level livestock balances and a consistent set of factors to estimate flows of used biomass not covered by international statistics (e.g. grazed biomass, crop residues) and indirect flows (i.e. biomass destroyed during harvest but not used). We found that current global terrestrial biomass appropriation amounted to 18.7 billion tonnes dry matter per year (Pg/yr) or 16% of global terrestrial NPP of which 6.6 Pg/yr were indirect flows. Only 12% of the economically used plant biomass (12.1 Pg/yr) directly served as human food, while 58% were used as feed for livestock, 20% as raw material and 10% as fuelwood. There are considerable regional variations in biomass supply and use. Distinguishing 11 world regions, we found that extraction of used biomass ranged from 0.3 to 2.8 t/ha/yr, per-capita values varied between 1.2 and 11.7 t/cap/yr (dry matter). Aggregate global biomass trade amounted to 7.5% of all extracted biomass. An analysis of these regional patterns revealed that the level of biomass use per capita is determined by historically evolved patterns of land use and population density rather than by affluence or economic development status. Regions with low population density have the highest level of per-capita biomass use, high-density regions the lowest. Livestock, consuming 30-75% of all harvested biomass, is another important factor explaining regional variations in biomass use. Global biomass demand is expected to grow during the next decades; the article discusses some options and possible limitations related to such a scenario.     

Precautionary motivation and consumption insurance: Empirical analysis of household consumption behavior in rural China

Based on a household survey in rural China, this paper discusses parameters such as precautionary motive, excess sensitivity, consumption insurance, and inter-temporal substitution in the household consumption function in rural China. The conclusions of the paper indicate that there is a significant precautionary motive in household consumption in rural China, but the function of consumption insurance is very limited, and the consumption is also excessively sensitive to the income change. Such parameters are different among consumers within different groups. __________ Translated from Zhongguo Nongcun Jingji 中国农村经济 (Chinese Rural Economy), 2006, (4): 12–19     

Market consumption and hidden consumption. A test for substitutability

Previous studies point to a generally efficient baseball betting market with no profitable betting strategies. However, failure to consider the time of year in which the bets are placed neglects differences in available information throughout the season. This analysis largely confirms the general efficiency of the major league baseball betting market by existing measures; however, incorporating the time of the year in which the bet is made generates persistent profitable betting strategies. The process by which information impacts returns is considered; increasing difficulties in determining the true favourite likely play the largest role, while assessing the exact favourite underdog relationship also has an impact.     

Carbon dioxide emission and income: A temporal analysis of cross-country distributional patterns

This paper explores the relationship between the inter-country income inequality and CO₂ emission and temporal shifts in such a relationship. It also examines how the mean per capita CO₂ emission and its distributional inequality are related to the corresponding mean and the distributional inequality of income. The analysis is based on a cross-country panel data set at the level of country-group. Here environmental damage is treated as a private good and the technique of Lorenz and specific concentration curve analysis have been used as the basic analytical framework to argue that distributional inequality of income should be an explanatory variable in the Environmental Kuznets Curve relationship, along with the mean income level. In the empirical exercise, Johansen's cointegration analysis technique is used to explore existence of statistically significant cointegrating vector(s) relating mean emission and Specific Concentration Ratio of emission to mean income level and Lorenz Ratio of income, using a set of country-group specific time series data set which covers four country-groups (viz., Africa, America, Asia and Europe) and the World as a whole. The empirical results confirm that the inter-country income inequality has significant effect on the mean emission level and inter-country inequality of emission level for most of the country-groups considered.