Family Size and Food Consumption: Exploring Economies of Scale with Panel Data

Abstract

We analyze the effects of family size on food consumption. Specifically, we explore the economies of scale that emerge in families, taking advantage of a very rich panel data for Spanish consumers. We hypothesize that family public goods induce economies of scale in consumption and, consequently, larger families should have higher per capita consumption of private goods, such as food. To that end, we estimate the Quadratic Almost Ideal Demand System to derive own-price and income elasticities, which allows us to test the economies of scale conditions on food consumption. Our results show that the positive relationship between per capita food expenditure and family size holds in only 585 observations, with these families being characterized as having per capita income in the two highest centiles of the distribution. Our results should be interpreted in the context of the particular economic crises of the 1970s and 1980s, as a consequence of the economic shocks due to very high oil prices that affected Spain.