There is continuing controversy over the importance of credit constraints. This paper investigates whether total household expenditure and debt is affected by an exogenous increase in access to ...credit provided by a credit market reform that enabled Danish house owners to use housing equity as collateral for consumption loans. We find that the magnitude of the response is correlated with the amount of equity released by the reform and that the effect is strongest for younger households. Even for this group, the response was moderate. The aggregate effect of the reform was significant but small.
We investigate how households in temporarily straitened circumstances due to an unemployment spell cut back on expenditures and how they spend marginal dollars of unemployment insurance (UI) benefit. ...Our theoretical and empirical analyses emphasize the importance of allowing for the fact that households buy durable as well as non-durable goods. The theoretical analysis shows that in the short run households can cut back significantly on total expenditures without a significant fall in welfare if they concentrate their budget reductions on durables. We then present an empirical analysis based on a Canadian survey of workers who experienced a job separation. Exploiting changes in the unemployment insurance system over our sample period we show that cuts in UI benefits lead to reductions in total expenditure with a stronger impact on clothing than on food expenditures. Our empirical strategy allows that these expenditures may be non-separable from employment status. The effects we find are particularly strong for households with no liquid assets before the spell started. These qualitative findings are in precise agreement with the theoretical predictions.
This paper provides an exhaustive characterization of testability and identifiability issues in the collective framework in the absence of price variation; it thus provides a theoretical underpinning ...for a number of empirical works that have been developed recently. We first provide a simple and general test of the Pareto-efficiency hypothesis, which is consistent with all possible assumptions on the private or public nature of goods, all possible consumption externalities between household members, and all types of interdependent individual preferences and domestic production technology. The test is proved to be necessary and sufficient. We then provide conditions for the identification of the sharing rule and the Engel curves of individual household members for a variety of different observational schemes.
According to the disciplining hypothesis, globalization restrains governments by inducing increased budgetary pressure. As a consequence, governments may attempt to curtail the welfare state, which ...is often seen as a drag on international competitiveness, by reducing especially their expenditures on transfers and subsidies. This globalization-induced welfare state retrenchment is potentially mitigated by citizens' preferences to be compensated for the risks of globalization ("compensation hypothesis"). Employing two different datasets and various measures of globalization, we analyze whether globalization has indeed influenced the composition of government expenditures. For a sample of 60 countries, we examine the development of four broad expenditure categories for the period 1971–2001: capital expenditures, expenditures for goods and services, interest payments, and subsidies and other current transfers. A second dataset provides a much more detailed classification: public expenditures, expenditures for defence, order, economic affairs, environment, housing, health, recreation, education, and social expenditures. However, this second data set is only available since 1990—and only for OECD countries. Our results show that globalization did not influence the composition of government expenditures in a notable way.
Empirical research on the relationship between economic inequality and crime has focussed on income inequality, despite the fact that income is not easily observed by potential criminals. We extend ...this literature by shifting the focus from income to its visible manifestation—conspicuous consumption. Using variation within US states over time, we document a robust association between the distribution of conspicuous consumption and violent crime. Our results link violent crime to inequality in visible expenditure, but not to inequality in total expenditure, suggesting that information plays a key role in the determination of crime. Furthermore, focussing on conspicuous expenditure allows for new tests of competing theories of crime. Our findings are consistent with social theories that link crime with relative deprivation, but provide little support for traditional economic theory.
The tendency for expenditure Engel curves to flatten out at high income levels is frequently cited as evidence that major shifts in household spending patterns take place as households become more ...affluent. Empirically, little has been done to examine (i) how pervasive this tendency is across the Engel curves of different goods and services, (ii) whether the rate at which Engel curves flatten out may significantly change over time and (iii) how robust Engel curves are in the face of changes in the income distribution of households. Using data from the UK Family Expenditure Survey, we find evidence that the tendency for Engel curves to flatten out, which we dub 'saturation', is indeed widespread across a wide range of goods and services. However, a tendency for their shape to shift over time, and for these shifts to co-move with changes in the income distribution of households, casts some doubt on whether the declining slope of Engel curves can be used to predict slowdowns in the growth rate of demand for particular goods and services.
Quadratic Engel Curves and Consumer Demand Banks, James; Blundell, Richard; Lewbel, Arthur
The review of economics and statistics,
11/1997, Letnik:
79, Številka:
4
Journal Article
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This paper presents a model of consumer demand that is consistent with the observed expenditure patterns of individual consumers in a long time series of expenditure surveys and is also able to ...provide a detailed welfare analysis of shifts in relative prices. A nonparametric analysis of consumer expenditure patterns suggests that Engel curves require quadratic terms in the logarithm of expenditure. While popular models of demand such as the Translog or the Almost Ideal Demand Systems do allow flexible price responses within a theoretically coherent structure, they have expenditure share Engel curves that are linear in the logarithm of total expenditure. We derive the complete class of integrable quadratic logarithmic expenditure share systems. A specification from this class is estimated on a large pooled data set of U.K. households. Models that fail to account for Engel curvature are found to generate important distortions in the patterns of welfare losses associated with a tax increase.
The neoclassical theory of demand applies to individuals, yet in empirical work it is usually taken as valid for households with many members. This paper explores what the theory of individuals ...implies for households that have more than one member. We make minimal assumptions about how the individual members of the household resolve conflicts. All we assume is that however decisions are made, outcomes are efficient. We refer to this as the collective setting. We show that in the collective setting household demands must satisfy a symmetry and rank condition on the Slutsky matrix. We also present some further results on the effects on demands of variables that do not modify preferences but that do affect how decisions are made. We apply our theory to a series of surveys of household expenditures from Canada. The tests of the usual symmetry conditions are rejected for two-person households but not for one-person households. We also show that income pooling is rejected for two-person households. We then test for our collective setting conditions on the couples data. None of the collective setting restrictions are rejected. We conclude that the collective setting is a plausible and tractable next step to take in the analysis of household behavior.
In order to examine household responses to the receipt of Social Security checks, this paper uses the Consumer Expenditure Survey's Diary Survey to estimate changes in household consumption around ...the check arrival date. The empirical analysis finds an increase in the amount of and probability of spending across multiple categories of expenditure in the first few days following Social Security check receipt relative to the day before the check arrives. In the instantaneous consumption categories of interest, however, there is only weak evidence of nonsmoothing behavior.
Background: Little is known about how morbidity levels progress over time and the implications of these morbidity trajectories for healthcare utilization. Objectives: To identify and compare ...characteristics of people in different morbidity trajectories and to evaluate how morbidity trajectories impact the performance of diagnostic risk-adjustment models. Research Design: Morbidity trajectories were derived from 3-year (2002 to 2004) of claims from a national insurance system. These trajectories, with or without 2004 claims-based risk adjusters developed from the Adjusted Clinical Group case-mix system, were used to explain medical utilization in 2005. Subjects: A random sample of Taiwanese National Health Insurance beneficiaries continuously enrolled from 2002 to 2005 (n=147,892). Measures: Adjusted R 2 of 5 types of healthcare expenditures. Results: On the basis of naturally occurring patterns, we identified 6 morbidity trajectory groups. People assigned to different trajectory groups have distinct demographics and medical utilization. The effect of adding morbidity trajectory indicators differed substantially by the comprehensiveness of baseline risk-adjustment models: the increase in adjusted R 2 ranged from 0.3% in the most comprehensive model to 5.7% in the demographics model. Conclusions: A simple morbidity trajectory classification over a 3-year period is almost as powerful a predictor of prospective medical utilization as more comprehensive baseline risk adjusters. It may be unnecessary to construct longitudinal morbidity trajectories if a comprehensive baseline model was adopted, especially for healthcare systems without the stability of continuous enrollment.
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