The Impact Of Family Size On Spending Pattern Essay

The Impact Of Family Size On Spending Pattern Essay

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Introduction
Families spend money in variety patterns. Small size family consisted of nuclear family needs less goods than large size family. Therefore, spending pattern of small family is different with the large one. This paper is aimed to find out current and past research regarding to what extent family size affect to spending pattern.

Background research
Prior research shows mix result. Bojer (1977) discover that a family consisted two adult and two children spent 2.5 times higher than a single adult. Likewise, Lino (1994) compares spending patterns of single mother families. The research shows that total expenditure of married couple with children was around 40% higher than single mother families. While, Lazear and Michael (1980) argue that a family consisted of two adults spend money around 30% lower than two families which has one member each.
Larger household benefit from economies of scale in consumption (Nelson 1988, Mok, Maclean, and Dalziel 2011). Public goods and private goods consumption make household different in spending experience. Additionally, Public goods which is can be consumed together with other family members without reducing satisfaction of each family increase economies of scale of large household. Whereas, consumption of private goods reduces economies of scale of large household as expenditure will increase along with the number of family member.
Two famous economies of scale models are the Engel model and the Barten model. Working (1943) introduced model of functional form of Engel curve parametric analysis. This model easily measured the economies of household size based on food expenditure (Gibson 2002, Lancester, Ray, and Valuezuela 1999). They conclude that the larger households the smaller s...


... middle of paper ...


...oxical result of Deaton and Paxson research attract other scholars to challenge. Gan and Vernon (2003) is one of the scholar who give comment on Deaton and Paxson research. By using the same assumption with Barten, their study shows that food share rise with household size. Therefore, it confirms Barten’s model. Furthermore, Deaton and Paxson rebut on Gan and Vernon claim. They state that their description is not clear and does not resolve the paradox (Deaton and Paxson 2003). The researchers claim that their objective is not testing the Barten model.
Conclusion
Variety of spending pattern in a family can be measured based on the size of the household using Barten model or Engel model. Even though Deaton and Paxson (1998) study claim there is a paradox, the two model well established to predict that the food expenditure is positively correlated with household size.

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