Economies of Scale in Household Consumption

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Copyright by Victoria Konstantinova Vernon 2004

The Dissertation Committee for Victoria Konstantinova Vernon certifies that this is the approved version of the following dissertation:

Household Economies of Scale, Food Consumption and Intra-Household Allocation of Time

Committee:

Li Gan, Supervisor

Daniel Hamermesh

Richard Dusansky

Douglas Dacy

Hong Yan

Household Economies of Scale, Food Consumption and Intra-Household Allocation of Time by Victoria Konstantinova Vernon, dipl.; M.A.

Dissertation Presented to the Faculty of the Graduate School of The University of Texas at Austin in Partial Fulfillment of the Requirements for the Degree of Doctor Of Philosophy

THE UNIVERSITY OF TEXAS AT AUTSIN

December 2004

Household Economies of Scale, Food Consumption and Intra-Household Allocation of Time

Publication No. ___________________

Victoria Konstantinova Vernon, Ph.D. The University of Texas at Austin, 2004

Supervisor: Li Gan

This thesis presents and empirically tests three utility theoretic models of the household behavior. Larger households economize money and time by sharing expenses and specializing labor within and outside of the home. A “paradox” arises when the budget share of food declines with household size in the consumer expenditure survey data contradicting the Barten model prediction that per capita food consumption should increase with household size. I test the Barten model in the expenditure data from the U.S., South Africa and Russia, and show that the share of food increases relative to a more public good and decreases relative to a more private good. This suggests food is less private than the composite of all other goods in the household budget; the likely public component of food being food preparation time. Extending the model to

incorporate time, I explain the food consumption paradox: larger households choose more time intensive meals, thus per capita expenditures on food decline with household size while food consumption does not. In the data from Russia, doubling the size of iv

household reduces per capita food expenditure by over 30% and per capita preparation time by about 75% in households with two and more people. Single men spend over three times more hours in food-related activities than men from two-person households spend. Single women enjoy smaller time saving for a similar transition, but married women enjoy no time saving at all. The quality of meals is unaffected by changes in household size. Finally, I study the effect of labor market shocks on the allocation of non-market time in transitional Russia. The model of a two-sector labor market with restricted hours of work in the state sector of employment and high fixed costs of entry in the private sector implies that earnings are a better approximation of worker’s wellbeing than wages. Cross-sectional and panel data analysis shows the population enjoyed more leisure during transition than before and movement to and from employment took place mostly at the expense of leisure hours. In response to higher earning opportunities employed men reduced leisure while employed women also cut down on childcare and housework.

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Table of Contents

Abstract List of Tables List of Figures Chapter 1. Chapter 2. 2.1 2.2 2.3 Introduction Food Consumption and Household Economies of Scale: Testing the Barten Model Introduction The Paradox Tests of the Barten Model 2.3.1 2.3.2 2.3.3 2.3.4 2.3.5 2.3.6 2.4 Data Nonparametric Engel Curves Does the Food Share Increase with Household Size? Treatment of the Owner-Occupied Housing . Evidence of Economies of Scale in Food Preparation Is the elasticity of food share with Respect to Household Size Smaller for Poorer Households? Conclusions Food Expenditure, Food Preparation Time and Household Economies of Scale 3.1 3.2 Introduction Model and Comparative Statics 3.2.1 Theoretical Model vi Chapter 3.

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