Using Engel's Law to delineate the middle class
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2014-05
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Abstract
This paper seeks to improve upon existing indicators of middle class membership by analyzing household consumption patterns using the Engel's Law, a well-established empirical regularity observed in household survey studies. Engel's Law states that the poorer a family is, the larger is the share of total expenditure that must be devoted to the procurement of food [Engel1895(1857)]. Using the Family Income and Expenditure Survey for 2009 merged with the Labor Force Survey for January 2010, ordinary least squares regressions were carried out to estimate Engel curves. The main finding is that the food expenditures of households whose most educated members did not finish high school are not statistically different from those families of persons without any formal schooling. For a given amount of family resource and holding other factors constant, we found that food shares only drop when the most educated member is a high school graduate. More substantial decreases are correlated to members who received at least some college education. Given that some college education is correlated with distinct changes in food consumption, and thus, overall consumption patterns, we propose that it be used as an alternative threshold.