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International Futures Help System

Household Consumption by Sector

Consumption by sector of origin is complicated by the fact that households significantly change their pattern of consumption as their incomes increase. To capture that dynamics, IFs relies upon a linear expenditure system (LES)—for a description of the LES approach see Taylor (1979: 219-223). Consumption in each sector of origin and household type (CSHH) in the LES depends upon a minimum level of expenditure in each sector (MINEX) and the marginal budget share (MARBD) of each sector in total consumption (C ) above the sum of all minimum expenditures—the floor (FLOOR). IFs computes the parameters for this consumption function during the first time cycle of the model. The constant of 0.5 in the equation for MINEX represents a Frisch parameter (the marginal utility of income with respect to income) of -2.0. Parameters and calculations are specific to household type.







In future years, given consumption by household type and sector, total consumption by sector across households is possible to compute, and that value is necessary for the goods and services market module.