Returns to scale in food preparation and the Deaton-Paxson puzzle

Thomas F. Crossley; Yuqian Lu

doi:10.1007/s11150-017-9399-4

Returns to scale in food preparation and the Deaton-Paxson puzzle

Published on 6 March 2018

In an influential paper, Deaton and Paxson (1998) raise an important puzzle inunderstanding returns to scale in household consumption. They note that, holding percapita resources constant, returns to scale (in at least some goods) imply that larger households are better off, and so should consume more of private goods such as food. However, they document in a range of data sets that larger households have lower per capita food expenditures (holding per capita resources constant).

We consider returns to scale in food preparation as a potential resolutionof a puzzle raised by Deaton and Paxson (Journal of Political Economy,106(5),897–930, 1998). We clarify the conditions under which returns to scale in foodpreparation can resolve the puzzle. The key requirement is that foods are hetero-geneous in time costs. We then show that detailed food expenditure and time use dataare consistent with larger households shifting to more time intensive foods.