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Research article - Peer-reviewed, 2023

Does income diversity really stimulate household consumption expenditure diversity? Evidence from mean-based and unconditional quantile regressions

Ma, Wanglin; Vatsa, Puneet; Owusu-Sekyere, Enoch; Zhou, Xiaoshi; Owusu, Victor

Abstract

Although both income diversity and household consumption expenditure diversity are positively correlated with income, little is known about how the former affects the latter. This study investigates how and to what extent income diversity stimulates household consumption expenditure diversity, utilizing data collected by the China Social Survey. We estimate a standard mean-based linear regression model and an unconditional quantile regression (UQR) model to explore mean-based and quantile-specific effects, respectively. The results of the linear regression show that income diversity significantly increases household consumption expenditure diversity. The UQR estimates provide more granular insights, revealing that income diversity improves consumption expenditure diversity at the lower quantiles (5(th) and 25(th)), with the largest effect occurring at the lowest 5(th) quantile; for the higher quantiles, income diversity has no effect on consumption expenditure diversity. Our findings highlight that policies aimed at improving consumption expenditure diversity and the quality of life of people in China should create an economic environment that allows people to diversify their income sources. From a methodological standpoint, we show that mean-based approaches may overlook the finer details of the linkages between income and consumption and thus should be applied cautiously.

Keywords

Income diversity; expenditure diversitxpenditure diversity; UQR; China

Published in

Applied Economics
2023, Volume: 55, number: 55, pages: 6567-6581
Publisher: ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD

    Sustainable Development Goals

    SDG8 Decent work and economic growth

    UKÄ Subject classification

    Economics

    Publication identifier

    DOI: https://doi.org/10.1080/00036846.2022.2159012

    Permanent link to this page (URI)

    https://res.slu.se/id/publ/120723