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How Do Consumption Patterns Influence the Discrepancy Between Economic and Subjective Poverty?

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Abstract

This study examines an income and wellbeing paradox—the discrepancy between economic and subjective poverty—from a consumption perspective. The theoretical underpinning is that households allocate their monetary resources into different consumption categories, which may lead to varying levels of utility, thereby shaping their perceptions of poverty in different ways. Data were drawn from the first wave of the Hong Kong Panel Survey for Poverty Alleviation (N = 1386). Cluster analysis identified four consumption patterns among the economically poor: (a) food-dominant, (b) rent-dominant, (c) food & rent-dominant, and (d) balanced, and five among the economically non-poor: (a) food-dominant, (b) rent-dominant, (c) education-high, (d) mortgage-high, and (e) balanced. Logistic regression revealed that the food-dominant cluster (compared with the balanced cluster) reduced the probability of feeling non-poor among the economically poor, and the mortgage-high cluster (compared with the balanced cluster) increased the probability of feeling poor among the economically non-poor. However, the significant association between the mortgage-high cluster and subjective poverty became insignificant after controlling for assets. The mortgage-high cluster’s positive impact on subjective poverty was most likely offset by the negative impacts of homeownership and assets. The study’s findings expand our understanding of how individuals’ perceived poverty status can be shaped by their consumption patterns.

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Notes

  1. The US$-HK$ exchange rate in January 2023 was HK$1 = US$0.13.

  2. The proportion of spending on a mortgage was only 1% because only 13 of the 403 respondents had a mortgage.

  3. In 2020, the income and asset limits for a single-person household were HK$33,000 and HK$850,000, respectively, whereas the limits for households with two or more persons were HK$66,000 and HK$1.7 million. The medium monthly household income in Hong Kong is HK$27,000.

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Funding

This work was supported by Chief Executive’s Community Project List (Grant No. 2013/CP03).

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Authors and Affiliations

  1. Department of Social Work and Social Administration, The University of Hong Kong, Hong Kong, SAR, China

    Chenhong Peng & Yik-Wa Law

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  1. Chenhong Peng
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Correspondence to Yik-Wa Law.

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Appendices

Appendices

Appendix I: Description of Control Variables

Gender

Female (reference group); Male

Age group

Young adults (18 ≤ age < 35); Middle-age adults (35 ≤ age < 65, reference group); Older adults (age ≥ 65)

HKPR

HKPR; Non-HKPR (reference group)

Marital status

Single; Cohabiting/married (reference group); Divorced/separated/widowed

Single-person household

Household with one member

Have children

Have child household members

Educational attainment

Primary school or below; Secondary school (reference group); Tertiary school and above

Employment status

Employed (reference group); Unemployed; Inactive (e.g., student, retiree, or homemaker)

Housing status

Public rental tenant (reference group); Subsidized homeowner; Private rental tenant; Private homeowner

Household income

Natural logarithm form of household income, which includes all household members’ employment earnings, investment returns, government and non-government cash transfers

Self-rated health

Poor, fair, good or excellent

Assets

Household’s total financial assets (e.g., savings, stocks, and funds) minus financial liabilities (e.g., debts and mortgage)

Appendix II: DH and CH Indices of Cluster Analysis Among the Economically Poor

Number of clusters

2

3

4

5

6

7

DH pseudo T-squared

65.11

58.45

22.90

67.86

25.48

36.75

CH pseudo T-squared

101.05

97.18

98.07

91.36

88.20

88.00

Appendix III: DH and CH Indices of Cluster Analysis Among the Economically Non-Poor

Number of clusters

2

3

4

5

6

7

DH pseudo T-squared

221.48

196.03

139.89

79.94

71.07

57.25

CH pseudo T-squared

198.52

238.76

262.28

269.35

253.00

238.95

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Peng, C., Law, YW. How Do Consumption Patterns Influence the Discrepancy Between Economic and Subjective Poverty?. J Happiness Stud 24, 1579–1604 (2023). https://doi.org/10.1007/s10902-023-00651-5

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