Household budget-share distributions and welfare implications: an application of multivariate distributional statistics

Abstract

In this paper the consequences of considering the household �food share� distribution as a welfare measure, in isolation from the joint distribution of itemized budget shares, is examined through the unconditional and conditional distribution of �food share� both parametrically and nonparametrically. The parametric framework uses Dirichlet and Beta distributions, while the nonparametric framework uses kernel smoothing methods. The analysis, in a three commodity setup (�food�, �durables�, �others�), based on household level rural data for West Bengal, India, for the year 2009�2010 shows significant underrepresentation of households by the conventional unconditional �food share� distribution in the higher range of food budget shares that correspond to the lower end of the income profile. This may have serious consequences for welfare measurement. � 2015 Taylor & Francis.