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Beyond Engel s Law - Pursuing an Engelian Approach to Welfare A Cross Country Analysis

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  • Wolfhard Kaus

    () (Max Planck Institute of Economics, Evolutionary Economics Group, Jena)

Abstract

Engel's law is known to be extraordinarily consistent across time and space. Accordingly, it has been widely used to determine poverty. However, also among the poorest, a certain amount of non food spending is necessary. To substantiate the distinction between necessities and luxuries, already Ernst Engel (1895) approached a behaviorally founded comprehensive assessment of structural changes in consumer expenditures. To build upon Engel's legacy and to complement the scare empirical literature, a behavioral approach is applied. It is conjectured that differences in satiation patterns of universally shared needs translate, on the aggregate level, into different shapes of Engel curves and thus also into different income elasticities of demand. Utilizing a nonparametric regression technique, it is explored whether and which expenditure categories change systematically with rising income. In line with the theoretical expectations, a number of empirical regularities in consumer expenditure patterns can be identified that go well beyond Engel's law.

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Bibliographic Info

Paper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2012-028.

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Date of creation: 06 Jun 2012
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Handle: RePEc:jrp:jrpwrp:2012-028

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Keywords: Engel's law; income elasticity of demand; necessities; luxuries; differential satiation;

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  1. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
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Cited by:
  1. Leonhard K. Lades, 2012. "The impact of differential satiation dynamics on changing consumer behavior, wellbeing, and innovative activity," Papers on Economics and Evolution 2012-16, Max Planck Institute of Economics, Evolutionary Economics Group.

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