Engel functions revisited

Abstract

Engel functions for the United States, based on cross-sectional data for 1972–73, are compared with those for 1960–61. Elasticities of expenditure for major categories of consumption are consistent with those found in other countries at various levels of economic development. However, elasticities for specific items within major categories varied markedly. Rental housing emerges as an inferior good. Superior goods are grouped into four major classes based on expenditure elasticities. Low elasticities tended to decline over time and were associated with positive family size elasticities. Expenditure elasticities that were high tended to become still higher over time and were associated with negative family size elasticities. An examination of expenditure elasticities across income classes indicates that ‘rich’ and ‘poor’ families have become more alike with respect to expenditures for ‘necessities’ but more unlike with respect to expenditures for ‘luxuries’ — education, recreation, owner housing, and men's and women's clothing. As incomes have risen, the composition of consumption has changed, as have the meaning and character of poverty. Questions are raised concerning the significance and research implications of the declining achievement/aspiration ratio for certain kinds of goods and services for many consumers within the United States and for most consumers in countries where incomes have risen less relatively and absolutely than have those of families in highly developed economies.