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August 2003, Vol. 126, No.8
A changing market: expenditures by Hispanic consumers, revisited
Geoffrey D. Paulin
The Hispanic population in the United States continues to grow. Accounting for more than 6 percent of the U.S. population in 1980, the share nearly doubled by the year 2000, with Hispanics accounting for just under 12 percent of the population.1 Growing at more than 1 percent every 5 years since 1980, the Hispanic population experienced its largest increase during the 1995–2000 period, when it increased nearly 1.5 percent. Similarly, Hispanics account for an increasing portion of consumer spending—more than 6 percent in 1995 and more than 7 percent in 2000.2
Many authors treat Hispanics as a homogenous group, and have shown differences in expenditure patterns from other groups, such as White and Black consumers.3 However, recent work has shown that within the Hispanic community, expenditure patterns differ substantially by geographic origin. That is, families of Mexican origin spend differently from those of Puerto Rican, Cuban, or those of other Hispanic origin. This is true of expenditure patterns in general,4 and for expenditures on specific items, such as food.5 Due to these differences, it is important to note that the size and composition of the U.S. Hispanic population are changing. From 1994–95 to 2000–01, the number of Hispanic consumer units grew faster (21.8 percent) than the number of non-Hispanic consumer units (5.9 percent).6 Among those Hispanic consumer units, the growth rates ranged from 9.4 percent for Mexican families to 76.6 percent for other Spanish families. The change in composition can be seen when examining the distribution of consumer units by ethnic origin. Although Mexican origin was still the largest segment in 2000–01 (56 percent), it has fallen as a share of all Hispanic consumer units since 1994–95 (62 percent). The Puerto Rican share was a little more than 11 percent in both years, while all other groups saw increases in their shares of Hispanic families over the same time period. Cuban and Central or South American families increased their shares between 1 percentage point and 2 percentage points; those of other Spanish origin increased their share by nearly 4 percentage points. (See table 1.) It is important to point out that some of these changes are undoubtedly due to changes in procedures used by the source from which these data are obtained. However, independent sources also show differences in growth patterns within the Hispanic community.7
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1 Geoffrey D. Paulin and David L. Ferraro, "Do Expenditures Explain Income? A Study of Variables for Income Imputation," Journal of Economic and Social Measurement, 22, 1996, pp. 103–28.
2 G.E.P. Box and D.R. Cox, "An Analysis of Transformations," Journal of the Royal Statistical Society, number 2, Series B, 1964, pp. 211–43.
3 Even if l is 1, it is hard to imagine why Y is transformed to be Y- 1.
4 Stuart Scott and Daniel J. Rope, "Distributions and Transformations for Family Expenditures," 1993 Proceedings of the Section on Social Statistics (Alexandria, VA, American Statistical Association, 1993), pp. 741–46.
5 Perhaps a more acoustically pleasing term is "marginal propensity to spend," but the abbreviation, MPS, might be confused with "marginal propensity to save," which is the opposite of MPE. Another candidate is "marginal propensity to purchase," but again, MPP is a term commonly used in economic literature to indicate "marginal physical product."
6 The exception is for goods or services that are perfectly price-inelastic. That is, quantities purchased do not change at all in response to changes in prices. An example is a life-saving prescription drug. A consumer who needs the drug will pay nearly any price to obtain it, even if it means selling possessions. However, even if the drug is inexpensive, the consumer will not increase quantity purchased, because the extra medication would be wasted. Nonetheless, while such goods and services may exist, they are unusual, and not likely to be found for the aggregate categories described; for example, in order for a good such as shelter and utilities or transportation to be perfectly price-inelastic, every component would have to be. Even with healthcare, this is not likely to be true. Even less likely, some components could have positive price elasticities and some negative, and in such magnitudes that they would exactly balance each other out in the aggregate. However, a positive price elasticity indicates an increase in quantity demanded as price rises, which is exceedingly unlikely to be observed in practice; even if it were, the magnitudes of the component elasticities exactly balancing is also not likely to be observed.
7 Readers familiar with budget constraints and indifference curves will note that when calculating the Engel curve, the slope of the budget constraint remains constant, but income changes. But when relative prices change, the slope of the budget constraint changes. Even on the same indifference curve, consumers will decrease purchases of the more expensive good and increase purchases of the less expensive good. If income is held constant so that the budget constraint under the old and new price levels cross, consumers will still move to a different indifference curve in response to the change in relative prices. Either way, the Engel curve changes when relative prices change, except for goods with perfect price-inelasticity.
Related BLS programs
Consumer Expenditure Survey
Consumer Price Index
A growing market: expenditures by Hispanic consumers.—Mar. 1998.
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