Measurement of inequality by components of farm household consumption expenditures

Abstract

Inequality in consumption levels of families, both nationally and internationally has been studied by Theil. However, empirical studies that measure inequality in farm household consumption, to our knowledge, have not been performed. This study measures inequality in farm household consumption. In addition, the study also measures inequality in consumption based on farm typology and farming region. Results from this analysis show consumption inequality among farm households is lower than consumption inequality among all other households. Results indicate that ‘other expenditures’ component has the highest inequality and ‘food and household supplies’ component has the lowest inequality. Further, farm typology has information about difference in consumption expenditures; the typology is informative when it comes to the components of consumption while the regional decomposition is not.

Notes

¹ Detractors such as Samuelson (2002) have argued that agricultural policies are outdated. He states that ‘Farm subsidies are huge political bribes.’ He concludes that past farm programmes that targeted ‘family firms’ may have had value in the 1930s or 1950s, but such justifications are no longer plausible.

² This is conceptually similar to the one the Bureau of Census uses to report income of all US households.

³ This unfortunate expression is common to the literature using Theil's inequality. Theil states ‘[O]ne measure of inequality is the natural logarithm of the ratio of the arithmetic mean income to geometric mean income.’ (Theil, 1989 p. 147). For simplicity of exposition consider the general entropy measure.