The role of food and housing expenditures in household economic well-being: evidence from Czechia

This study focuses on the food and housing expenditures of households relative to their disposable incomes, utilizing a unique opportunity of merged national-level data from the Household Budget Survey and EU-Statistics on Income and Living Conditions in Czechia (2020–2023). The study considers both Engel’s law on food expenditures and Schwabe’s law on housing expenditures by verifying their implications for poverty measures. Interpretation of the two laws assumes that households spending the same shares of their income on food/housing are equally well-off, and a specific level of food-/housing-income ratio is then used as a poverty threshold, which implies that absolute household income is irrelevant to their economic well-being. Both laws are valid in Czechia: relative food and housing expenditures are decreasing with income. We proxy households’ economic well-being using both subjective and objective indicators of household economic well-being: within sub-groups with similar relative food/housing expenditures, absolute income still significantly affects the economic well-being of households. This effect is stronger for those designated as the poorest than it is for those deemed richest. We claim that the validity of Engel’s and Schwabe’s laws does not straightforwardly imply that having the same relative food/housing expenditures means that households are equally well-off.