HYI Working Paper Series: Maki Atsushi
Engel’s Law in Vietnam and the Philippines: Effects of In-Kind Consumption on Inequality and Poverty (Atsushi Maki and Satoshi Ohira)
Abstract: This paper focuses on the Philippines and Vietnam where poverty alleviation programs play a critical role in maintaining minimal living standards, making it essential to understand how impoverished households make ends meet through in-kind transactions. Using Engel curves including and excluding in-kind consumption, we found that when we include in-kind consumption in consumption expenditure, the Engel curve is monotonic downward sloping in Vietnam and in the Philippines. On the other hand, when we exclude in-kind consumption from consumption categories, the Engel curve was hump-shaped. Contrary to Engel’s Law, we find that the Engel curve is upward sloping in very poor households, meaning that food expenditures as a percentage of income increases with income. Our findings are also suggestive about the different effects of in-kind consumption depending on the stages of economic development that may be relevant in terms of economic and social policies in developing countries especially those targeting improvement in the standard of living for poor households.
Keywords: Engel’s Law, upward sloping Engel curve, in-kind consumption