- Born on March 26, 1821 in Germany, Ernest Engel is a well-known German economist.
- In 1857, Engel promoted his model about family expenditures based on two observations he made:
1. At lower income levels, families spend a higher proportion of income on food than high-income families.
2. When there are more children, families spend a higher proportion of income on food.
- Engel’s model theorized that if two families spent the same percentage of income for food, they should be equal. This is called family equivalence scales.
- The goal of this marginal cost approach is to determine the child’s share of family expenditures which cannot be easily observed and measured.
- Called the Engel Estimator (or Engel Equivalence Scale), it is often believed to generate results higher than the actual children’s expenditures because children are food intensive.
- Dr. David Betson used the Engel method in two studies: Betson-Engel 1990 and Betson-Engel 2001
- His work is published in this document: Engel, Enrst (1857). “Die Productions and Consumtionsverhaltnisse des Konigsreichs Sachsen.” Zeitscrift des Statisticshen Bureaus des Koniglich Sachischen Ministreriums des Innern, 3.