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All types of consumer expenditures ultimately vie for the same pool of limited resources—the consumer's discretionary income. Consequently, consumers' spending in a particular industry can be better understood in relation to their expenditures in others. Although marketers may believe that they are operating in distinct and unrelated industries, it is important to understand how consumers, with a given budget, make trade-offs between meeting different consumption needs. For example, how much would escalating gas prices affect consumer spending on food and apparel? Which industries would gain most in terms of extra consumer spending as a result of a tax rebate? Answers to these questions are also important from a public policy standpoint because they provide insights into how consumer welfare would be affected as consumers reallocate their consumption budget in response to environmental changes. This study proposes a structural demand model to approximate the household budget allocation decision, in which consumers are assumed to allocate a given budget across a full spectrum of consumption categories to maximize an underlying utility function. The authors illustrate the model using Consumer Expenditure Survey data from the United States, covering 31 consumption categories over 22 years. The calibrated model makes it possible to draw direct inferences about the trade-offs individual households make when they face budget constraints and how their relative preferences for different consumption categories vary across life stages and income levels. The study also demonstrates how the proposed model can be used in policy simulations to quantify the potential impacts on consumption patterns due to shifts in prices or discretionary income.

The high and rising household savings rate in China is not easily reconciled with the traditional explanations that emphasize life cycle factors, the precautionary saving motive, financial development, or habit formation. This paper proposes a new competitive saving motive: as the sex ratio rises, Chinese parents with a son raise their savings in a competitive manner in order to improve their son’s relative attractiveness for marriage. The pressure on savings spills over to other households. Both cross-regional and household-level evidence supports this hypothesis. This factor can potentially account for about half the actual increase in the household savings rate during 1990–2007.

Exponential growth bias is the pervasive tendency to linearize exponential functions when assessing them intuitively. We show that exponential growth bias can explain two stylized facts in household finance: the tendency to underestimate an interest rate given other loan terms, and the tendency to underestimate a future value given other investment terms. Bias matters empirically: More-biased households borrow more, save less, favor shorter maturities, and use and benefit more from financial advice, conditional on a rich set of household characteristics. There is little evidence that our measure of exponential growth bias merely proxies for broader financial sophistication.

I elicit causal effects of spousal observability and communication on financial choices of married individuals in the Philippines. When choices are private, men put money into their personal accounts. When choices are observable, men commit money to consumption for their own benefit. When required to communicate, men put money into their wives' account. These strong treatment effects on men, but not women, appear related more to control than to gender: men whose wives control household savings respond more strongly to the treatment and women whose husbands control savings exhibit the same response. Changes in information and communication interact with underlying control to produce mutable gender-specific outcomes.

To assess household availability of NOVA food groups in nineteen European countries and to analyse the association between availability of ultra-processed foods and prevalence of obesity. Ecological, cross-sectional study. Europe. Estimates of ultra-processed foods calculated from national household budget surveys conducted between 1991 and 2008. Estimates of obesity prevalence obtained from national surveys undertaken near the budget survey time. Across the nineteen countries, median average household availability amounted to 33·9 % of total purchased dietary energy for unprocessed or minimally processed foods, 20·3 % for processed culinary ingredients, 19·6 % for processed foods and 26·4 % for ultra-processed foods. The average household availability of ultra-processed foods ranged from 10·2 % in Portugal and 13·4 % in Italy to 46·2 % in Germany and 50·4 % in the UK. A significant positive association was found between national household availability of ultra-processed foods and national prevalence of obesity among adults. After adjustment for national income, prevalence of physical inactivity, prevalence of smoking, measured or self-reported prevalence of obesity, and time lag between estimates on household food availability and obesity, each percentage point increase in the household availability of ultra-processed foods resulted in an increase of 0·25 percentage points in obesity prevalence. The study contributes to a growing literature showing that the consumption of ultra-processed foods is associated with an increased risk of diet-related non-communicable diseases. Its findings reinforce the need for public policies and actions that promote consumption of unprocessed or minimally processed foods and make ultra-processed foods less available and affordable.

This article provides unprecedented direct evidence from large-scale survey data on both the intensity (how much?) and direction (to whom?) of income comparisons. Income comparisons are considered to be at least somewhat important by three-quarters of Europeans. They are associated with both lower levels of subjective well-being and a greater demand for income redistribution. The rich compare less and are happier than average when they do, which latter is consistent with relative income theory. With respect to the direction of comparisons, colleagues are the most frequently-cited reference group. Those who compare to colleagues are happier than those who compare to other benchmarks.

The consumption literature uses adult equivalence scales to measure individual-level inequality. This practice imposes the assumption that there is no within-household inequality. In this paper, we show that ignoring consumption inequality within households produces misleading estimates of inequality along two dimensions. To illustrate this point, we use a collective model of household behaviour to estimate consumption inequality in the U.K. from 1968 to 2001. First, the use of adult equivalence scales underestimates the initial level of cross-sectional consumption inequality by 50%, as large differences in the earnings of husbands and wives translate into large differences in consumption allocations within households. Second, we estimate the rise in between-household inequality has been accompanied by an offsetting reduction in within-household inequality. Our findings also indicate that increases in marital sorting on wages and hours worked can simultaneously explain two-thirds of the decline in within-household inequality and between a quarter and one-half of the rise in between-household inequality for one and two adult households.

The dramatic increase in international food and fuel prices in recent times is a crucial issue for developing countries and the most vulnerable to these price shocks are the poorest segments of society. In countries like Pakistan, the discussion has focused on the impact of substantially higher food and fuel prices on poverty. This paper used PSLM and MICS household level data to analyze the impact of higher food and energy prices on the poverty head count and the poverty gap ratio in Pakistan. Simulated food and energy price shocks present some important results: First, the impact of food price increases on Pakistani poverty levels is substantially greater than the impact of energy price increases. Second, the impact of food price inflation on Pakistani poverty levels is significantly higher for rural populations as compared to urban populations. Finally, food price inflation can lead to significant increases in Pakistani poverty levels: For Pakistan as a whole, a 20% increase in food prices would lead to an 8% increase in the poverty head count.

Engel curves describe how household expenditure on particular goods or services depends on household income. German statistician Ernst Engel (1821–1896) was the first to investigate this relationship systematically in an article published about 150 years ago. The best-known single result from the article is “Engel's law,” which states that the poorer a family is, the larger the budget share it spends on nourishment. We revisit Engel's article, including its context and the mechanics of the argument. Because the article was completed a few decades before linear regression techniques were established and income effects were incorporated into standard consumer theory, Engel was forced to develop his own approach to analyzing household expenditure patterns. We find his work contains some interesting features in juxtaposition to both the modern and classical literature. For example, Engel's way of estimating the expenditure–income relationship resembles a data-fitting technique called the “regressogram” that is nonparametric—in that no functional form is specified before the estimation. Moreover, Engel introduced a way of categorizing household expenditures in which expenditures on commodities that served the same purpose by satisfying the same underlying “want” were grouped together. This procedure enabled Engel to discuss the welfare implications of his results in terms of the Smithian notion that individual welfare is related to the satisfaction of wants. At the same time, he avoided making a priori assumptions about which specific goods were necessities, assumptions which were made by many classical economists like Adam Smith. Finally, we offer a few thoughts about some modern literature that builds on Engel's research.

In this study, we attempt to understand how household budget allocations across various expenditure categories change when the economy is in recession or expansion. The common assumption is that a household’s tastes would not change as a function of economic conditions and therefore any adjustments in expenditure patterns during economic contractions/expansions would simply be due to changes in the consumption budget. Standard economic models translate these budgetary effects into lateral movements along a set of fixed Engel curves, which relate category expenditure shares to total expenditures. We propose and test a conceptual framework based on the notion of relative consumption, which prescribes that, for any given total consumption budget, expenditure shares for positional goods/services will decrease during a recession, while shares for nonpositional goods/services will increase (i.e., shifting the entire Engel curve upward or downward, depending on the nature of the expenditure category and the economic conditions).