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Income-expenditure elasticities of less-healthy consumption goods

Income-expenditure elasticities of less-healthy consumption goods PurposeThe purpose of this paper is to identify how consumption of 12 goods – alcohol, cigarettes, fast food, items sold at vending machines, purchases of food away from home, cookies, cakes, chips, candy, donuts, bacon, and carbonated soft drinks – varies across the income distribution by calculating their income-expenditure elasticites.Design/methodology/approachData on 22,681 households from 2009-2012 from the Bureau of Labor Statistics’ Consumer Expenditure Survey were used. The data were analyzed using ordinary least squares regressions and Cragg’s double hurdle model which integrates a binary model to determine the decision to consume and a truncated normal model to estimate the effects for conditional (y>0) consumption.FindingsIncome had the greatest effect on expenditures for alcohol (0.314), food away from home (0.295), and fast food (0.284). A one percentage-point increase in income (approximately $428 at the mean) translated into a 0.314 percentage-point increase in spending on alcoholic beverages (approximately $1 annually at the mean). Income had the smallest influence on tobacco expenditures (0.007) and donut expenditures (−0.009).Research limitations/implicationsPercentage of a household’s discretionary budget spent on the studied goods falls substantially as income gets larger. Policies targeting the consumption of such goods will disproportionately impact lower income households.Originality/valueThis is the first manuscript to calculate income-expenditure elasticities for the goods studied. The results allow for a direct analysis of targeted consumption policy on household budgets across the income distribution. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Enterpreneurship and Public Policy Emerald Publishing

Income-expenditure elasticities of less-healthy consumption goods

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References (30)

Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
2045-2101
DOI
10.1108/JEPP-03-2016-0008
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to identify how consumption of 12 goods – alcohol, cigarettes, fast food, items sold at vending machines, purchases of food away from home, cookies, cakes, chips, candy, donuts, bacon, and carbonated soft drinks – varies across the income distribution by calculating their income-expenditure elasticites.Design/methodology/approachData on 22,681 households from 2009-2012 from the Bureau of Labor Statistics’ Consumer Expenditure Survey were used. The data were analyzed using ordinary least squares regressions and Cragg’s double hurdle model which integrates a binary model to determine the decision to consume and a truncated normal model to estimate the effects for conditional (y>0) consumption.FindingsIncome had the greatest effect on expenditures for alcohol (0.314), food away from home (0.295), and fast food (0.284). A one percentage-point increase in income (approximately $428 at the mean) translated into a 0.314 percentage-point increase in spending on alcoholic beverages (approximately $1 annually at the mean). Income had the smallest influence on tobacco expenditures (0.007) and donut expenditures (−0.009).Research limitations/implicationsPercentage of a household’s discretionary budget spent on the studied goods falls substantially as income gets larger. Policies targeting the consumption of such goods will disproportionately impact lower income households.Originality/valueThis is the first manuscript to calculate income-expenditure elasticities for the goods studied. The results allow for a direct analysis of targeted consumption policy on household budgets across the income distribution.

Journal

Journal of Enterpreneurship and Public PolicyEmerald Publishing

Published: Apr 10, 2017

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