A decomposition of trends in U.S. consumer expenditures on communications and travel: 1984–2002

This paper offers a conceptual and partly empirical decomposition of the trends in U.S. consumer expenditures on five communications and nine transportation subcategories between 1984 and 2002. We find that inflation nearly always increases unit prices. Income effects are positive for all categories, meaning that these are all normal goods, not inferior ones. We speculate that taste changes have contributed to increasing expenditures in most categories, with the exception of out-of-town lodging, the public transit component of the public transportation category, and the old communication media categories of postage and reading. We suggest that production and technological changes have led to decreased unit prices in most categories. In the private vehicle operations categories, technological improvements dominate, so that expenditure shares have been decreasing despite increasing demand. Conversely, in the new media categories, taste changes dominate, so that expenditure shares are increasing despite technological improvements which lower prices. The decomposition explored here enhances our understanding of these important expenditure categories, and provides a useful methodology with which to examine trends in other categories as well.