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Abstract
The functional form used to represent
expenditures or consumption as a function
of income and household size (Engel relationship)
dramatically affects estimates of
elasticities of these variables. This impact
also holds true when the elasticities are
computed at the mean of the sample used.
When per capita expenditures were
expressed as a function of per capita income,
the double-and semi-log functional
forms provided the best statistical fit. When
expenditures were expressed as a function
of household size and income, the quadratic
functional form provided the best
statistical fit.