THE SATURATION OF SPENDING DIVERSITY and the Truth about Mr Brown and Mrs Jones
20.04.2018
Several cross country studies find that rising household income leads to consumption spending being spread more evenly across different spending categories (Clements et al., 2006). We argue that this result is likely due to aggregation. Using more disaggregated UK household level spending data, we show that the spending diversity of households only rises up to a certain income level and then starts to decline as households concentrate more of their spending on particular expenditure categories that differ across households.