Inequality decomposition of farm family living expenditures and the role of the life cycle

Purpose - The purpose of this paper is to use data from the 2007 Agricultural Resource Management Survey to assess the inequality in the distribution of farm family living expenditures. The impact on inequality of marginal increases in expenditure components with respect to aggregate expenditures is also addressed in the context of the life cycle and under various “equity” weights that reflect the extent to which society is averse to inequality. Design/methodology/approach - Inequality in the distribution of households' equivalent‐scale total expenditures E and of their K components is measured using the concept of the extended Gini coefficient (GE). Findings - Results show an unequal distribution of total expenditures, with “food including food away from home” and “clothing, personal care products, etc.” as the two expenditure items that are most suitable for either a subsidy or a tax‐hike. No discernable statistical difference is found when the elasticities of expenditures were estimated across two distinct age‐groups and across various levels of “equity” weights. Research limitations/implications - Research is based on cross‐sectional data and does not allow for dynamic assessment of expenditure elasticities. Originality/value - The paper describes the use of an innovative non‐parametric method to estimate expenditure elasticities among farm households.