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The Deaton–Paxson paradox in the consumption of Russian households

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  • Berendeeva, Ekaterina

    (National Research University Higher School of Economics, Moscow, Russian Federation)

  • Ratnikova, Tatiana

    (National Research University Higher School of Economics, Moscow, Russian Federation)

Abstract

The existence of economies of scale or the Deaton–Paxson paradox significantly complicates the estimations of household consumption significantly. This paper investigates whether this paradox is present for some core elements of the consumption of Russian households based on RLMS data. The results confirmed the existence of the paradox, but showed that during an economic crisis it has the least effect. In addition, it was found that indicators of the economy of scale differ for households with various income and composition and for different types of goods. Findings of the study indicate that for more accurate estimations in calculating the economic indicators that take into account household expenditures, such as level and depth of poverty using alternative approaches, adjustment for economies of scale is necessary. The study also provides an analysis of the same type with the power switch on the effect of the other when changing the size of the household in trying to understand the source of the paradox. The results show that switching phenomenon does exist, but acting in different directions with the addition to the family of the child and adult. The study also offers an examination of the “switching effect” in order to understand the real source of the paradox. The results show that “switching phenomenon” does exist, but works in different directions with the addition of the child or the adult to the family.

Suggested Citation

  • Berendeeva, Ekaterina & Ratnikova, Tatiana, 2016. "The Deaton–Paxson paradox in the consumption of Russian households," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 42, pages 54-74.
  • Handle: RePEc:ris:apltrx:0291
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    References listed on IDEAS

    as
    1. Trevon D. Logan, 2011. "Economies Of Scale In The Household: Puzzles And Patterns From The American Past," Economic Inquiry, Western Economic Association International, vol. 49(4), pages 1008-1028, October.
    2. Li Gan & Victoria Vernon, 2003. "Testing the Barten Model of Economies of Scale in Household Consumption: Toward Resolving a Paradox of Deaton and Paxson," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1361-1377, December.
    3. Angus Deaton & Christina Paxson, 1998. "Economies of Scale, Household Size, and the Demand for Food," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 897-930, October.
    4. Victoria Vernon, 2004. "Food Expenditure, Food Preparation Time and Household Economies of Scale," Labor and Demography 0412005, University Library of Munich, Germany.
    5. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
    6. Gibson, John, 2003. "Does Measurement Error Explain a Paradox About Household Size and Food Demand? Evidence from Variation in Household Survey Methods," 2003 Annual meeting, July 27-30, Montreal, Canada 22198, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    7. Gardes, F. & Starzec, C., 2000. "Economies of Scale and Food Consumption : a Reappraisal of the Deaton-Paxson Paradox," Papiers d'Economie Mathématique et Applications 2000.08, Université Panthéon-Sorbonne (Paris 1).
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    More about this item

    Keywords

    economies of scale; Engel curves; household consumption;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D10 - Microeconomics - - Household Behavior - - - General

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