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The Distribution of Households Consumption-Expenditure Budget Shares

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Author Info
Matteo Barigozzi () (Sant’Anna School of Advanced Studies, Laboratory of Economics and Management, Piazza Martiri della Liberta 33, Pisa I-56127,Italy.)
Lucia Alessi () (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
Marco Capasso () (Utrecht School of Economics, Utrecht University, P.O. Box 80.115, 3508 TC Utrecht, The Netherlands.)
Giorgio Fagiolo () (Sant’Anna School of Advanced Studies, Laboratory of Economics and Management, Piazza Martiri della Liberta 33, Pisa I-56127,Italy.)

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Abstract

This paper explores the statistical properties of household consumption-expenditure budget share distributions —defined as the share of household total expenditure spent for purchasing a specific category of commodities— for a large sample of Italian households in the period 1989-2004. We find that household budget share distributions are fairly stable over time for each specific category, but profoundly heterogeneous across commodity categories. We then derive a parametric density that is able to satisfactorily characterize household budget share distributions and: (i) is consistent with the observed statistical properties of the underlying levels of household consumption-expenditure distributions; (ii) can accommodate the observed across-category heterogeneity in household budget share distributions. Finally, we taxonomize commodity categories according to the estimated parameters of the proposed density. We show that the resulting classification is consistent with the traditional economic scheme that labels commodities as necessary, luxury or inferior. JEL Classification: D3, D12, C12.

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Paper provided by European Central Bank in its series Working Paper Series with number 1061.

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Length: 54 pages
Date of creation: Jun 2009
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Handle: RePEc:ecb:ecbwps:20091061

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Related research
Keywords: Household Consumption Expenditure; Budget Shares; Sum of Log-Normal Distributions.;

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  1. Attanasio, Orazio P., 1999. "Consumption," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 11, pages 741-812 Elsevier. [Downloadable!] (restricted)
  2. Giulio Bottazzi & Angelo Secchi, 2006. "Explaining the Distribution of Firm Growth Rates," RAND Journal of Economics, The RAND Corporation, vol. 37(2), pages 235-256, Summer.
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  3. Richard Blundell & Xiaohong Chen & Dennis Kristensen, 2007. "Semi-Nonparametric IV Estimation of Shape-Invariant Engel Curves," Econometrica, Econometric Society, vol. 75(6), pages 1613-1669, November. [Downloadable!] (restricted)
  4. Kirman, Alan P, 1992. "Whom or What Does the Representative Individual Represent?," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 117-36, Spring. [Downloadable!] (restricted)
  5. Erich Battistin & Raffale Miniaci & Guglielmo Weber, 2000. "What do we learn from recall consumption data?," IFS Working Papers W00/10, Institute for Fiscal Studies. [Downloadable!]
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  6. Joachim Engel & Alois Kneip, 1996. "Recent approaches to estimating Engel curves," Journal of Economics, Springer, vol. 63(2), pages 187-212, June. [Downloadable!] (restricted)
  7. Martin Hohnisch & Sabine Pittnauer & Manisha Chakrabarty, 2002. "Empirical Regularities in Distributions of Individual Consumption Expenditure," Quantitative Finance Papers cond-mat/0201195, arXiv.org. [Downloadable!]
  8. Giorgio Fagiolo & Mauro Napoletano & Andrea Roventini, 2006. "Are Output Growth-Rate Distributions Fat-Tailed? Some Evidence from OECD Countries," Working Papers 36, Università di Verona, Dipartimento di Scienze economiche. [Downloadable!]
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