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Income elasticities of expenditure for food.

Raymond Gieseman and Brent Moulton, "Income elas

ticities of expenditure for food," published in 1987 Proceedings of the American Statistical Association, Business and Economics Section.

Based on data from the 1985 Consumer Expenditure Survey, estimates of the income elasticities of expenditure for the several food groups included in the study are shown in the paper. These income elasticities of expenditure, evaluated at mean after-tax income levels, were found to be inelastic without exception. For total food, the expected change in consumer unit spending was .31 percent for each 1 -percent change in income. Thus, a consumer unit with an income 10 percent above the mean could be expected to spend about 3 percent more per week on food than a comparable consumer unit at the mean after tax income.

This predicted incremental change in total spending for food, although small, may conceal different expenditure response patterns for food at home and away from home, and for individual food-at-home groups. Expenditures for food away from home were considerably less inelastic (.55) than those for food at home (.17). This finding is consistent with the notion that consumer units with more money to spend eat out more often. Given the greater response to income change, food-away-from-home expenditures, which accounted for 36 percent on average of the total spending for food per consumer unit in 1985 (up from 33 percent in 1980-81), should continue to increase over time if incomes increase.

Among the food-at-home groups, expenditures most responsive to income change were those for fish and seafood (.36), other dairy products (.29), fresh and processed fruits (.23 and .29), and miscellaneous foods (.23). Food-at-home groups least responsive to income changes were pork (.10), other meats (.03), eggs (-.03), fresh milk and cream (.05), sugar and other sweets (.06), and fats and oils (.08).

The food requirements and eating habits of families differ, depending upon the number of persons in the family, the stage in the life cycle of family members, and the economic well-being of the household. These differences are reflected in the food expenditure patterns of consumer units. For example, with the same amount of income to spend, couples with one child are likely to spend their food dollar differently than couples without children. Older adults may eat out less often, and therefore spend less on food away from home.

From this same study, it was also possible to describe how expenditures for food and selected food groups vary when another person at a given stage in the life cycle was added to the consumer unit. For these calculations, the average size of a family was 2.6 persons and its after-tax income was approximately $25,000 ($480 weekly). Results are shown for persons in eight different age categories, and separately for girls and boys 10 through 19 years old.

According to the findings, adding a child under 5 years old to the consumer unit increased weekly food expenditures by $2.61. However, expenditures for food at home went up by $7.52 per week, and expenditures for food away from home declined by $4.13.

Across age groups, expenditures for total food increased with the age of the consumer unit member, reaching a peak of $20.98 for an adult 30 to 44 years old, and then declined to $13.29 for an adult 65 years old or over, a drop of nearly 37 percent. However, adding an adult from any of the age groups 30 to 44 and over had about the same effect on food-at-home expenditures, but the effect on expenditures for food away from home differed. For example, adding a 30- to 44-year-old person to the unit increased food-at-home expenditures by $18.44 and food-away-from-home expenditures by $1.85. Adding an adult 65 years old increased at-home expenditures by $18.17, but decreased expenditures on food away from home by $5.44.

Boys tend to affect food expenditures more than girls. Adding a boy ages 10 to 14 years to the consumer unit increased the weekly food bill by $7.75, compared to $6.89 for girls in the same age category. Differences in the effects of adding boys and girls on unit food expenditures were even more pronounced for the 15- to 19-year-old category.
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Title Annotation:Consumer Expenditure Survey Conference paper summaries
Author:Gieseman, Raymond; Moulton, Brent
Publication:Monthly Labor Review
Date:Aug 1, 1988
Words:707
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