Borgeraas, Brusdal & Li Zhengang

Consumption approach to the cost of children

The case of China and Norway

Borgeraas, Brusdal & Li Zhengang

Question: Is the consumption approach better suited to define the relative cost of children than the tradtional OECD-scale?

Hypothesis: The main weakness’s in the OECD-scale – in addition to lack of empirical foundation– are its insensitiveness to :

• place (country, region)• culture• economic and social change• distribution of welfare

Theoretical and methodological ambitions: better measures and scales for measuringcost of livelihood, in particular more appropriate weights for the cost of children.

Borgeraas, Brusdal & Li Zhengang

To illustrate the main arguments we compare China and Norway

China Rapid economic growth Rapid social change Different regional

developments Growing economic and

social inequality Children are at the centre

of family consumption

Norway Rich country Incremental social change Relatively equal income

distribution Welfare state High public spending on

children’s welfare

Borgeraas, Brusdal & Li Zhengang

Because of expanding economy, improved living standards, changed consumer behavior and child centered consumption, we assume that the cost of children are increasing.

In 80 per cent of urban households with wage earners, a child’s average consumption exceeds that of an adult (Sun Yunxiao, 2000)

China:

Borgeraas, Brusdal & Li Zhengang

Year Urban China

Norway

1958 40,0%1991 53,8 % 14,8%2001 38,2 % 11,4%2007 36,3 % 11,3%

The Engel’s coefficients in urban China and Norway

Borgeraas, Brusdal & Li Zhengang

The modified OECD scale• Each additional adult cost 50 per cent of the first adult

• Children under 14 years have a consumption need that amounts to 30 per cent of the first adult

• This ratio is the same in Norway as in urban and rural China

• We have strong indications that the relative cost of children is very different in these three contexts.

These differences are not visible with traditional measures, and we need an alternative methods to measure the cost of children that accounts for time, space and pace of Change. We argue for a consumption approach.

Borgeraas, Brusdal & Li Zhengang

Measures as input for policyClassical economics and poverty research have always argued for a material approach to levels of living: Income is treated as a depended variable, and not the other way around.

In line with the classical tradition we have to ask some importantquestions before we decide the poverty line.

- What do families/children need? - What types of items (consumer goods) and activities can satisfy these needs? - How much does it cost to buy these items and participate in these activities (consumption expenditure)?- What income level equals this consumption level?

Borgeraas, Brusdal & Li Zhengang

Item Monthly expenses (Yuan) % of incomeFamily Food 1500 14.22

Transportation 100 0.95Power/ electricity 200 1.90Communication 450 4.27Car 1500 14.22Clothes 400 3.79Commodity 50 0.47Leisure and entertainment 80 0.76

Cosmetics 80 0.76Tobacco 180 1.71Social network 500 4.74Holiday trip 400 3.79Community service fee 200 1.90

Estate loan 2600 24.65Child English class 420 3.98  Piano class 416 3.94  Weiqi chess class 200 1.90  Computer class 35 0.33  Tuition fee 600 5.69  Meals at school 200 1.90  Cloth 50 0.47  Books and stationary 50 0.47

  Summer camp 167 1.58  Health care 50 0.47  Insurance 120 1.14  Total 10548 100.00

Household expenses Case 3: Couple with 10-year-old child, Chendu. Husband 38, manager. Wife 28, clerk. Family income 120.000

Borgeraas, Brusdal & Li Zhengang

individual specific expenses( ￥ per month)Gender     Girls boys Girls boys women menAge 2-3 4-6 7-12 7-12 13-17 13-17 20-50 20-501.food 168.54 81.39 61.29 67.59 67.59 83.19 82.20 99.60 2.clothing 29.00 31.37 41.13 39.04 63.83 61.33 52.89 46.50 3.personalcare 1.00 1.00 6.17 7.67 6.17 7.67 10.57 9.67 4.education and recreation 1.90 3.15 20.42 22.50 57.08 60.00    

Age 2-3 4-6 7-12 　 13-16 　 20-50 　5.health and hygiene 23.33 23.33 19.17 19.17 19.17 19.17 19.17 19.17 6.Travel     3.00 3.00 24.00 24.00 6.00 6.00 7.Children care   80.00            Total 　 　 　 　 　 　 　 　  223.77 220.24 151.18 158.97 237.84 255.36 170.83 180.94

Reference budget in China

Borgeraas, Brusdal & Li Zhengang

household specific expenses( ￥ per month)

  Family size  2 3 4 5 68. Housing  52.13 56.83 56.83 72.22 72.22 9.household good  47.32 47.74 50.65 65.03 65.44 10.other everyday household items  28.57 38.67 38.78 55.61 55.72 11.household service  32.00 32.00 32.00 64.00 64.00 12.Transport and communication tools  66.67 66.67 66.67 89.58 89.58 Total 　 　 　 　  226.69 241.90 244.93 346.44 346.97 per Person 　 　 　 　  113.34 80.63 61.23 69.29 57.83

Borgeraas, Brusdal & Li Zhengang

Borgeraas, Brusdal & Li Zhengang

Borgeraas, Brusdal & Li Zhengang

Borgeraas, Brusdal & Li Zhengang

Borgeraas, Brusdal & Li Zhengang

Indvidual expenses in different age groups in China

Borgeraas, Brusdal & Li Zhengang

Borgeraas, Brusdal & Li Zhengang

Budget expenditures for children aged 6-13 in Norway and 7-12 in China

Borgeraas, Brusdal & Li Zhengang

Budget expenditures for children aged 14-17 in Norway and children ages 13 – 17 in China. Per cent