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CHILDREN AS CONSUMERS:INVESTIGATING CHILD DIARY

EXPENDITURE DATALisa Farrell* and Michael A. Shields

*School of Economics, University College Dublin, Ireland** Department of Economics, University of Melbourne, Australia

We are grateful to the Data Archive, University of Essex, for supplying the Family Expenditure Survey data.

UCD Geary InstituteResearch, Analysis, Evidence

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The Child as a consumer why do we care?

• Small component of national income – but a substantial proportion of the demand for certain industries

• Adult expenditure patterns may be effected by expenditure as a child

• Interaction with household expenditure

• Welfare implications for children

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Our Focus

• Determinants of child expenditure patterns– Child income– Child characteristics– Parent and sibling characteristics– Household characteristics– Household expenditure patterns

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The data

• FES 1997-98

• 90% response rate

• 1789 children

• Aged 7-15

• Average weekly expenditure £11.14

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Figure 1: Mean Expenditure by Age

0

5

10

15

20

25

7 8 9 10 11 12 13 14 15

Age

Exp

endi

ture

£'s

Girls

Boys

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TABLE 1: Mean Expenditure by Individual and Household Characteristics

(£’s per week) All Boys Girls

Mean Expenditure 12.48 (0.30) 11.94 (0.32) 13.01 (0.36)

Age 7-9 8.32 (0.23) 8.41 (0.22) 8.22 (0.24)

Age 10-12 11.66 (0.30) 11.34 (0.33) 12.03 (0.28)

Age 13-15 17.89 (0.43) 17.42 (0.38) 18.27 (0.47)

White 12.63 (0.35) 12.05 (0.33) 13.22 (0.37)

Non-white 10.79 (0.23) 10.78 (0.25) 10.81 (0.22)

Only child in the household 14.35 (0.41) 13.35 (0.32) 15.32 (0.78)

One sibling 10.80 (0.24) 10.28 (0.23) 11.33 (0.26)

Two siblings 13.23 (0.35) 12.62 (0.33) 13.86 (0.37)

More than two siblings 13.91 (0.78) 14.91 (0.56) 13.16 (0.40)

Lone parent family 12.19 (0.33) 10.68 (0.28) 13.57 (0.37)

Two parent family

Working mother

Not working mother

12.57

12.78

11.98

(0.35)

(0.29)

(0.41)

12.34

12.72

10.63

(0.33)

(0.30)

(0.36)

12.81

12.81

13.34

(0.36)

(0.29)

(0.46)

Gross household weekly income (top quartile) 13.66 (0.74) 13.46 (0.88) 13.87 (1.20)

Gross household weekly income (bottom quartile) 10.20 (0.53) 9.02 (0.61) 11.29 (0.84)

Sample 1786 894 892

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What do they buy?TABLE 2: Child Expenditure by Commodity Groups (£’s per week)

£’s per week Unconditional Mean

Expenditure

Conditional Mean

Expenditure*

Participation Rate (%)

Drinks 0.70 (0.03) 1.06 (0.03) 66.1

Leisure 1.28 (0.07) 2.77 (0.09) 46.3

Vice 0.20 (0.04) 3.55 (0.15) 5.5

Sweets 1.27 (0.03) 1.42 (0.03) 89.4

Food/snacks 2.18 (0.07) 2.96 (0.07) 75.4

Clothes 2.41 (0.17) 9.34 (0.27) 25.8

Travel 0.71 (0.05) 2.33 (0.07) 30.5

Electrical goods 1.40 (0.14) 5.22 (0.25) 26.8

Books/magazines 0.95 (0.04) 1.75 (0.04) 53.1

Toys 0.51 (0.04) 2.24 (0.07) 22.6

Sample 1786

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The model- what they buy

• Multivariate Probit Model – E is a 0/1 indicator

JjyxE jiijki

K

kjjji ,...,1,ln

1

*

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The model- how much they buy

• Budget share equations for commodity i for child j

• Almost Ideal Demand System (AIDS)

1

11

lnJ

jjijijjij

K

kkijkjji pyxw

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Results discussed- what they buy

• Older children buy less child-orientated commodities, such as toys.

• Boys have a lower probability of buying clothes and books than girls.

• Lone parent children have a higher probability of buying vice type products and are more likely to buy travel products.

• Children from wealthy households also have a higher probability of consuming vice products

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Results- how much they buyThe effect of income

TABLE 4: Estimated Expenditure (Disposable Income) Elasticities from AIDS

Child Expenditure Category Expenditure Elasticity:

Evaluated at the unconditional

mean budget share

Expenditure Elasticity:

Evaluated at the conditional

mean budget share

Drinks 0.954 0.969

Leisure 1.151 1.070

Vice 2.675 1.093

Sweets 0.729 0.758

Food/snacks 1.169 1.127

Clothes 1.847 1.219

Travel 1.512 1.156

Electrical goods 0.759 0.936

Books/magazines 0.460 0.707

Toys 0.844 0.965

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TABLE 6: Estimated Effect of Own Product Parental Budget Share on Child Budget Share

Child Expenditure Category |t|

Drinks 0.650 4.69

Leisure 1.095 2.14

Vice -0.007 0.35

Sweets 0.265 1.24

Food/snacks 0.119 1.79

Clothes 0.073 1.14

Travel -0.042 0.30

Electrical goods 0.114 1.42

Books/magazines 0.241 2.13

Toys 0.089 0.68

Results- how much they buyThe effect of household provision

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Results discussed-how much they buy

• The effect of income– drinks, sweets, books, toys are normal goods – clothes, travel and vice are luxury goods

• The effect of household provision– Higher parental budget share= higher child

budget share • Suggesting intergenerational transfer of

preferences

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Conclusion

• A first attempt to understand children as consumers…some data issues– Child income data is poor (under-recorded

relative to expenditure)– Child work info is poor- paper rounds etc.– Better breakdown for high technology

products purchase of music from the internet and mobile phone credit etc.