Economies of Scale in Household Consumption: With Application to Australia

15 Pages Posted: 18 Aug 2005

See all articles by Nanak Kakwani

Nanak Kakwani

International Poverty Centre

Hyun H. Son

Asian Development Bank


This paper presents a general framework for defining the economies of scale in household consumption. It allows commodity specific economies of scale (taking into account the substitution effects). The chief contribution of the paper is to show how one can estimate economies of scale from cross section budget data without price information. The problem of identification that is inherent in these models is overcome by making use of some assumptions about the nature of goods and services employed in the estimation. The methodology developed in the paper is applied to Australian Household Expenditure Survey for 1984 to calculate item wise and overall economies of scale.

Suggested Citation

Kakwani, Nanak and Son, Hyun H., Economies of Scale in Household Consumption: With Application to Australia. Australian Economic Papers, Vol. 44, No. 2, pp. 134-148, June 2005. Available at SSRN:

Nanak Kakwani (Contact Author)

International Poverty Centre ( email )

SBS- Ed.BNDES, 10° andar
70.076-900- Brasilia-DF
+ 55 61 2105 5000 (Phone)
+ 55 61 2105 5001 (Fax)

Hyun H. Son

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila

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