Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/70160 
Authors: 
Year of Publication: 
2012
Series/Report no.: 
Jena Economic Research Papers No. 2012,028
Publisher: 
Friedrich Schiller University Jena and Max Planck Institute of Economics, Jena
Abstract: 
Engel's law is known to be extraordinarily consistent across time and space. Accordingly, it has been widely used to determine poverty. However, also among the poorest, a certain amount of non food spending is necessary. To substantiate the distinction between necessities and luxuries, already Ernst Engel (1895) approached a behaviorally founded comprehensive assessment of structural changes in consumer expenditures. To build upon Engel's legacy and to complement the scare empirical literature, a behavioral approach is applied. It is conjectured that differences in satiation patterns of universally shared needs translate, on the aggregate level, into different shapes of Engel curves and thus also into different income elasticities of demand. Utilizing a nonparametric regression technique, it is explored whether and which expenditure categories change systematically with rising income. In line with the theoretical expectations, a number of empirical regularities in consumer expenditure patterns can be identified that go well beyond Engel's law.
Subjects: 
Engel's law
income elasticity of demand
necessities
luxuries
differential satiation
JEL: 
D12
Document Type: 
Working Paper

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