Working Paper: NBER ID: w26850
Authors: Philippe De Vreyer; Sylvie Lambert; Martin Ravallion
Abstract: The classic Working-Leser household Engel curve is unpacked to reveal individual budget allocations across commodities as a function of both individual and household total spending. Two main findings emerge on calibrating our model to an unusual sub-household dataset for Senegal. First, for all except education spending, our results are consistent with the separable structures found in two-stage bargaining and collective models of the household. Second, there are large biases in standard household Engel-curve estimates when compared to consistently aggregated sub-household estimates, though in differing degrees and directions depending on the type of commodity. The main source of bias is a household effect on sub-household spending behavior, though this is partially offset by a bias due to intra-household inequality, which emerges as a confounder in aggregating to the household level.
Keywords: Engel curves; household consumption; intrahousehold inequality; Senegal
JEL Codes: D12; D13; O12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Latent household effects (H31) | individual demand behavior (D12) |
| Income gains (D31) | different consumption patterns among household members (D10) |
| Intrahousehold inequality (D13) | bias in consumer demand functions (D11) |
| Intrahousehold inequality + individual preference differences (D10) | household demand (R22) |
| Household effects + intrahousehold inequality (D13) | discrepancies between household-level and subhousehold-level estimates (C83) |