Household Food Expenditures across Income Groups: Do Poor Households Spend Differently than Rich Ones?

The Life Cycle - Permanent Income Hypotheses (LCPIH) suggests that the timing of an income payment or government transfer should have no effect on the expenditures of the recipient. In this paper we test the LCPIH against a dynamic model of household consumption which predicts clustered food expenditure. We use data from 7,013 households in fifty-two urban and peri-urban markets throughout the United States containing detailed daily expenditure data collected by ACNielsen Homescan for 2003. Specifically, we examine aggregate food expenditure patterns, shopping trip patterns, and expenditure patterns across retail channels over calendar weeks, weekly seven day cycles, and days of the week. Our main finding is that households in the lowest 25 percent of the income distribution that have zero employed people have a significantly higher differenced expenditure level in the beginning of the month and significantly lower differenced expenditure in the last week or weeks of the calendar month, thus rejecting the LCPIH. Further, we find that, in general, households do not use convenience stores as a complementary retail channel to the grocery channel.