Affluence and Food: A Simple Way to Infer Incomes

Clements, Kenneth W.; Dong-ling, Chen

doi:10.1093/ajae/aaq049

Cited by 13 publications

(15 citation statements)

References 20 publications

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“…Equation (4) can be used to infer incomes from the food shares, and the income and price elasticities. This approach was used by Clements and Chen (2010) with the 2005 version of the ICP data to compare income in country c with that in d:…”

Section: (Iii) Food Pricesmentioning

confidence: 99%

“…Following the global financial crisis in 2008, many countries have undertaken large-scale programs of monetary and fiscal expansion. That subsequent inflation has been mostly subdued would seem to Source: Clements and Chen (2010) indicate the transition to the long run can take a long time.…”

Section: (Iii) Food Pricesmentioning

confidence: 99%

“…Probability of Income Differences Source: Clements and Chen (2010) where b < 0 is the demand elasticity of demand, k > 0 the supply elasticity, and e and g are independent, zero-mean disturbances with covariance matrix. var e g…”

Section: (Ii) a Stochastic Commodity Marketmentioning

confidence: 99%

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Four Laws of Consumption

Clements

2019

Economic Record

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Scientific knowledge can be distilled into a set of laws that are sufficiently general and robust to be useful in describing and predicting behaviour – the behaviour of physical objects (the orbits of the planets, for example), invisible forces (electricity), economies (why some prosper and others languish) and people (education as deliberate investment in human capital). This paper identifies four empirical regularities in consumption behaviour that are sufficiently general and pervasive to qualify as ‘laws’: Engel’s law; the law of demand (the downward‐sloping demand curve); quantities more dispersed than prices; and the ‘law’ of -12 for price elasticities. In each case, I survey previous research, use international evidence to illustrate the workings of the laws and demonstrate their practical use.

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Section: (Iii) Food Pricesmentioning

confidence: 99%

Section: (Iii) Food Pricesmentioning

confidence: 99%

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Four Laws of Consumption

Clements

2019

Economic Record

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“…With the increasing interest in poverty impacts of external shocks (Levinsohn, Berry and Friedman 2000;Cranfield et al 2007;Hertel and Winters 2006), having a valid demand system for eliciting the impacts of such changes on consumption, across the income spectrum can be very useful. This is an important aspect of household response to price 1 Another interesting work we came across is Clements and Chen (2010). They work the Engel's Law in the opposite direction, using per capita food budget shares to decipher the per capita real income for a country.…”

Section: Motivationmentioning

confidence: 99%

Predicting within country household food expenditure variation using international cross-section estimates

2011

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There is a long and distinguished literature involving demand analysis using international cross-section data. Such models are widely used for predicting national per capita consumption. However, there is nothing in this literature testing the performance of estimated models in predicting demands across the income spectrum within a single country. This paper fills the gap. We estimate an AIDADS model using cross-section international per capita data, and find that it does well in predicting food demand across the income distribution within Bangladesh. This suggests that there may be considerable value in using international cross-section analysis to study poverty and distributional impacts of policies.

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“…The model construction aims to minimize the effect of a priori assumptions and maximize the influence of well recognized empirical regularities such as Engel's Law and the implied non‐homotheticity of preferences which underlies it. Engel's Law has been invoked to study many aspects of consumer behavior ranging from: international consumption comparisons (Theil and Chung ; Seale and Regmi ); a data‐parsimonious way to determine the standard of living based simply on knowledge of the food budget share (Clements and Chen ); a foundation upon which to build a more detailed study of cross price elasticities (Regmi and Seale ); the study of properties of consumer demand systems (Barnett and Serlitis ); comparison of models and their implications for income elasticities (Gao ); and even to study bias in the construction of the CPI by studying the (in)stability of Engel Curves over time (Hamilton ).…”

Section: Introductionmentioning

confidence: 99%

Consumer Expectations: A Residual Based Approach

Rehman

Cooper

2016

Review of Income and Wealth

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This paper presents an economy-wide consumer expectations indicator that reflects different degrees of optimism or pessimism with respect to consumers' confidence in their economy. The indicator provides a useful complement to traditional economic indicators that are frequently used to compare countries, such as gross domestic product (GDP) in purchasing power parity (PPP) terms. Our indicator may be seen as representing the influence of social wealth on economic behavior-that is, of effects left out of a standard economic analysis. We use a theoretical approach to integrate the expectations measure with the International Comparison Programs (ICP) PPP GDP statistics which produces a measure we term "effective GDP." Compared to the ICPs PPP figures, the measure of "effective GDP" differs from the ICPs PPP estimates by as much as four to five percent in the positive direction for apparently optimistic countries and as much as two percent downwards for pessimists. JEL Codes: D12, D16, E10The estimated production function, if it does not additionally allow for productivity, can therefore be viewed really as an aggregate factor input index rather than as a direct measure of output. Taking the ratio of actual output to this factor input index then identifies productivity with the "residual" (in ratio form), viz. as the proportion of output that is not explained by the combination of factor inputs. Can a similar approach be applied in consumer studies to identify the conceptual variable "expectations"?At first sight there is an obvious reason why the residual-based productivity approach cannot be directly taken over to the study of the consumer. This obvious reason is that consumer "output" (that is, "utility") is unobservable-viz. there is no "actual" to compare to a model-based estimate which is some function of inputs. However, on further thought, the same conceptual idea-to estimate a key contributing factor influencing behavior from a residual-is worthy of closer examination. While consumer utility is not observable, consumer expenditure patterns certainly are. Many models of consumer expenditure do not make room for the influence of expectations. However, if these models are reasonably correct in other respects, perhaps an approach akin to the "productivity-as-a-residual" paradigm can be employed to measure consumer expectations by reference to the relationship between actual and model-predicted consumer expenditure behavior.This paper makes use of a model that explains the share of total consumer expenditure allocated to 12 broad consumption categories in a wide range of countries covered by the International Comparison Program (ICP). Differences in real income are accounted for within the model along with non-homothetic preferences. However, once income differences are controlled for, arguably a major reason for differences in consumer behavior across countries that cannot be explained by the model could be due to wide ranging variations in consumer expectations across countries. The model contains some simple f...

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Affluence and Food: A Simple Way to Infer Incomes

Cited by 13 publications

References 20 publications

Four Laws of Consumption

Four Laws of Consumption

Predicting within country household food expenditure variation using international cross-section estimates

Consumer Expectations: A Residual Based Approach

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