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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. Kerwin Kofi Charles & Erik Hurst & Nikolai Roussanov, 2009. "Conspicuous Consumption and Race," The Quarterly Journal of Economics, MIT Press, vol. 124(2), pages 425-467, May.
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  7. Scitovsky, Tibor, 1981. "The Desire for Excitement in Modern Society," Kyklos, Wiley Blackwell, vol. 34(1), pages 3-13.
  8. Musgrove, Philip, 1985. "Food Needs and Absolute Poverty in Urban South America," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 31(1), pages 63-83, March.
  9. Ulrich Witt, 2001. "special issue: Learning to consume - A theory of wants and the growth of demand," Journal of Evolutionary Economics, Springer, vol. 11(1), pages 23-36.
  10. Andreas Chai & Alessio Moneta, 2010. "Retrospectives: Engel Curves," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 225-40, Winter.
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Cited by:
  1. Leonhard Lades, 2013. "Explaining shapes of Engel curves: the impact of differential satiation dynamics on consumer behavior," Journal of Evolutionary Economics, Springer, vol. 23(5), pages 1023-1045, November.
  2. 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, Philipps University Marburg, Department of Geography.

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