Does Inequality Affect the Needs of the Poor?

72 Pages Posted: 17 Nov 2018 Last revised: 14 Mar 2024

See all articles by Eve Colson-Sihra

Eve Colson-Sihra

Hebrew University of Jerusalem - Department of Economics

Clement Bellet

Erasmus University Rotterdam (EUR)

Date Written: March 1, 2024

Abstract

We investigate how inequality affects what is considered most necessary to purchase. Combining detailed consumption surveys in India with an instrumental variable approach, we first provide evidence that inequality is associated with a decrease in calorie consumption for poor households. This effect is driven by upward comparisons and associated with poor households spending more on luxuries, consistent with relative deprivation theory. We then estimate a structural demand system to isolate the impact of inequality on needs from supply-side effects. We find that inequality increases the need of the poor for "little luxuries" (e.g., dairy products, energy use) at the expense of necessities (e.g., cereals). This shift in the hierarchy of needs accounts for more than two third of the decline in the calorie consumption of the poor over the period.

Keywords: Consumer Theory, Inequality, Needs, Malnutrition, Poverty

JEL Classification: D01, D12, I14, I30, O12

Suggested Citation

Colson-Sihra, Eve and Bellet, Clement, Does Inequality Affect the Needs of the Poor? (March 1, 2024). Available at SSRN: https://ssrn.com/abstract=3270814 or http://dx.doi.org/10.2139/ssrn.3270814

Eve Colson-Sihra (Contact Author)

Hebrew University of Jerusalem - Department of Economics ( email )

Jerusalem
Israel

Clement Bellet

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

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