Demand patterns in Spain

Abstract

This paper contains the Spanish contribution to the consumption part of the DEMPATEM project. The paper is organized in five Sections and three Appendixes. Section I describes the main data source, the Encuestas de Presupuestos Familiares (EPF) collected by the Instituto Nacional de Estadística (INE) in 1973-74, 1980-81 and 1990-91. Measurement problems in relation to household expenditures and incomes are discussed. Section II presents the evolution of consumption expenditure patterns at current prices using two commodity classifications. The first one, fully described in Appendix A, classifies all commodities into 8 goods and 12 services. In the second one, used for international comparisons in the DEMPATEM project, expenditures in housing, health, education and durable goods are excluded from total household expenditures. In the Spanish case, the magnitude to be explained by econometric methods is the change in budget shares of 8 non-durable goods and 9 services between 1980-81 and 1990-91. Section III is devoted to the introduction of a number of potential explanatory factors, including a) demographic and other household characteristics, b) income (or household expenditures) effects, c) changes in household expenditures inequality, d) changes in relative prices holding quantities demanded constant, referred to as the Baumol effect as in Blow et al. (2003), and e) other changes. Sector IV contains a discussion of the estimated budget elasticities for the 17 commodities in 1980-81 and 1990-91, the explanation of the increase in the services share over the period, and the comparison of this magnitude between Spain and the U.S. in 1980 and 1990. Appendix B describes how the Baumol effect has been constructed in the Spanish case, while regression results for the 17 Engel curve system are relegated to Appendix C. The final Section V studies the robustness of the previous results