Variation in Engel's law across quantiles in Taiwan: toward an alternative concept of near poverty line

Abstract

In many countries, the definition of near poverty line is the given amount that is slightly above the poverty line, but the precise economic and statistical basis is unknown. In order to find a natural candidate of near poverty line, this paper employs robust quantile regression on a quadratic parametric model of Engel's law to investigate changes in curvature, signifying changes in taste or liquidity constraint, across food share quantiles. By analyzing thirty waves of the Survey of Family Income and Expenditure in Taiwan (1980–2009), it finds that the curvature systematically follows the ‘bifocal’ variation, indicating a perceptible break in consumption behavior. The threshold separating the two food consumption patterns provides a natural candidate of near poverty line of Taiwan.

Keywords:

• food consumption pattern
• Engel's law
• near poverty line
• quantile regression

JEL classification:

• D12
• I32

Acknowledgements

The authors would like to thank anonymous referees for many valuable comments. The authors also thank seminar participants at Tamkang University and Chinese Culture University for their comments on earlier drafts of this paper.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Notes on contributors

Meng-Shiuh Chang

Meng-Shiuh Chang was an associate professor in the School of Public Finance and Taxation, Southwestern University of Finance and Economics and is currently an associate professor in Institute of Poyang Lake Eco-economics, Jiangxi University of Finance and Economics. He has published widely on econometrics with particular focus on nonparametric statistics.

Teng-Yuan Hu

Teng-Yuan Hu received the PhD degree in economics from University of Rochester and is currently an associate professor at Tamkang University. His primary research interests are in econometrics and applied economics. He recently published a co-authored paper on Taiwan Economic Review–the top economics journal in Taiwan.

Ching-Yuan Lin

Ching-Yuan Lin received the PhD degree in economics from The University of Southern California and is currently an associate professor at Tamkang University. His primary research interests are in development economics, with a particular interest in income distribution issues. He is also interested in institutional economics, comparative economic systems, and the economic history of China. He recently published a co-authored paper on Social Indicators Research.