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Exploring the returns to scale in food preparation (baking penny buns at home)

  • Thomas Crossley

    ()

    (Institute for Fiscal Studies and Institute for Fiscal Studies, University of Essex)

  • Yuqian Lu

    (Institute for Fiscal Studies)

We show that as household size increases, households substitute away from prepared foods and towards ingredients. They also devote more time to food preparation. These observations (1) are consistent with a simple model with home production, returns to scale in the time input to food preparation, and varieties of food that differ in the required time input; (2) support the idea that returns to scale in home production are an important source of returns to scale in consumption; and (3), mean that across household sizes, household market expenditures on food are not proportional to food consumption quantities. The latter may provide a partial explanation for a puzzle raised by Deaton and Paxson.

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Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W05/03.

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Length: 28 pp.
Date of creation: Jan 2005
Date of revision:
Handle: RePEc:ifs:ifsewp:05/03
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  1. Patricia Apps & Ray Rees, 2001. "Household Saving and Full Consumpyion Over the Life Cycle," CEPR Discussion Papers 428, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  2. Martin Browning & Pierre-André Chiappori & Arthur Lewbel, 2013. "Estimating Consumption Economies of Scale, Adult Equivalence Scales, and Household Bargaining Power," Review of Economic Studies, Oxford University Press, vol. 80(4), pages 1267-1303.
  3. Mark Aguiar & Erik Hurst, 2004. "Consumption vs. Expenditure," NBER Working Papers 10307, National Bureau of Economic Research, Inc.
  4. Angus Deaton & Christina Paxson, 2003. "Engel's What? A Response to Gan and Vernon," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1378-1381, December.
  5. Deaton, A. & Paxson, C., 1997. "Economies of Scale, Household Size, and the Demand for Food," Papers 178, Princeton, Woodrow Wilson School - Development Studies.
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