Engel’s law in China: Some new evidence

• Published date: 01 August 2022
• Author: Menggen Chen
• Date: 01 August 2022
• DOI: http://doi.org/10.1111/rode.12887

1640 

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     wileyonlinelibrary.com/journal/rode  Rev Dev Econ. 2022;26:1640–1662.

© 2022 John Wiley & Sons Ltd

Received: 24 July 2019 

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  Revised: 21 February 2022 

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  Accepted: 1 March 2022

DOI: 10.1111/rode.12887  

REGULAR ARTICLE

Engel’s law in China: Some new evidence

MenggenChen

School of Statistics, Beijing Normal 

University, Beijing, P.R. China

Correspondence

Menggen Chen, School of Statistics, 

Beijing Normal University, Beijing,  

P.R. China.

Email: cmg@bnu.edu.cn

Funding information

This study was supported by Project of 

National Social Science Fund of China 

(19ATJ002, 19ZDA118)

Abstract

Engel's  law  states  that  the  proportion  of  food  in  total 

consumption expenditure  is negatively  associated with 

household  income.  Different  from  other  studies  with 

time  series,  this  paper  investigates  the  applicability  of 

Engel's law  in  China,  with a sample  of  cross- sectional 

data  in  2016  covering  the  31  provincial  regions  of 

China. The  empirical results  support  Engel's law,  and, 

especially after  the consideration  of food  prices, which 

is represented by  regional food  purchasing power pari-

ties,  the  negative  impact  of  income  on  Engel's  coeffi-

cient becomes more statistically significant. Meanwhile, 

Engel's coefficient is positively related to the food price. 

According to different types of income elasticity, food is 

divided into two groups: life  necessities and life nonne-

cessities. Then, the inferior Engel's coefficient (IEC) and 

superior  Engel's  coefficient  (SEC)  are  calculated  with 

the  expenditures  of  necessary  and  nonnecessary  food, 

respectively, and  a  further  study  shows  that the  nega-

tive relationship between income  and the SEC  is much 

weaker than that between income and the IEC. Besides, 

Engel's coefficient is more strongly affected by the price 

of food necessities than by that of food nonecessities.

KEYWORDS

Engel's coefficient, food consumption, food price, resident 

income, total consumption expenditure

JEL CLASSIFICATION

D12; I31; O10

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CHEN

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INTRODUCTION

The German statistician Ernst Engel was famous for defining Engel's law. In economics, Engel's 

law is an important rule first established by statistical analysis. This rule may be the most reliable 

one among all empirical laws derived from economic data (Houthakker,1987). It states that the 

less the  household  income is,  the  greater  the proportion  of  food  in the  total  consumption  be-

comes; also, with household income increasing, the proportion of food in the total consumption 

will drop. Based on further investigation, researchers proposed a specific indicator, that is, Engel's 

coefficient, to account  for the proportion of  food in  the total expenditure of  families. As  an im-

portant statistical  indicator  in  economics,  Engel's  coefficient  is widely  used  in  many  fields  of 

economics, including the measurement of  economic development level, consumption structure 

of residents,  poverty, and consumer price  index (CPI) deviation. Internationally, Engel's coeffi-

cient has become an important measurement of the living level of countries or regions, although 

some criticism of  the applicability of  Engel's coefficient  exists among researchers (Chakrabarty 

& Hildenbrand,2011).

Based on  the  survey  data of  worker families  in  Belgium,  Engel (1857)  found  that  the  con-

sumption of  food  and other  items  depends on  household income  or  the total  expenditure and 

that the proportion of food in the total consumption expenditure is usually negatively associated 

with household income. This finding  was thereafter called Engel's law. Originally, Engel's work 

intended to analyze the structural changes in the consumption pattern of residents when income 

increases. Later, it was described as the Engel curve, which can be used to measure the living and 

welfare level of  households  (Chai &  Moneta,2010).  As an  important  economic theory, Engel's 

law illuminates the economic structure and is one of the main standards to evaluate the poverty 

of a country or region. According to Engel's law, Engel's coefficient can be calculated as the ratio 

of food consumption in the total expenditure of a family:

Engel's  coefficient  has  been  an  important  indicator  internationally  to  measure household  living  

level. When the living standard rises, Engel's coefficient will decrease. In fact, Engel's coefficient can 

not only reveal the consumption structure, which shows the  living level, but also reflect changes in 

the economic structure and the level of economic development. A cross- section of Engel's coefficient 

can be used to reflect  living levels in different countries  or regions in a certain  period, while a time  

series of  Engel's coefficients can  be used to  reflect the dynamics of  consumption structure and the 

change of living level.

Orshansky (1969)  and Chenery  and Syrquin  (1975) tested  the universality  of  Engel's coeffi-

cient and Engel's law at the macro-  and microlevels, respectively. When studying the Engel curve 

of American families, Orshansky (1969) found that it is a breakpoint when Engel's coefficient is 

0.3, and those above that breakpoint are usually poor families. Therefore, Engel's coefficient has 

been an  important  indicator to  measure  poverty in  a  country  or region.  Chenery  and Syrquin 

(1975) found that Engel's coefficient decreases while the gross national product (GNP) increases, 

and the correlation coefficient between them was 0.82 according to the data from 101 countries. 

Brady and Barber (1948) found  that Engel's coefficient for  the family with a child  or children is 

usually greater  than that  for the  family without  children. Deaton  and  Case(1988)  pointed out 

that cultural  tradition  and  custom  has a  great  influence  on  Engel's  coefficient. Gibson  (2002) 

analyzed the influence  of the  number, age, and gender structure  of family  members on Engel's 

(1)

EC

=

food consumption

total expenditure of consumption

×100

%