The Social Embeddedness of Consumption: Towards the Relationship of Income and Expenditures over Time in Germany

Expenditures and their patterns over time are expressions of the standard of living of individuals, households, and the society they live in. Nevertheless social and economic analysis focused rather on the analysis of production than on consumption, and income was widely used as a main indicator of (economic) well-being. On the other hand, expenditure regards as a measure to describe and estimate the participation of households in the wealth of nation. Therefore, there is an interest in the relationship of income and spending money. It is often considered that expenditure and income are the two sides of the same coin called “social inequality”. This assumption implies a strong relationship between these two measures of welfare inequality. Due to the lack of longitudinal data in Germany, we used repeated crosssectional data (RCS) in our empirical analysis which is based on the West German Income and Expenditure Survey (IES) in 1973, 1978, 1983, 1988 and 1993. The IES’s are representative cross-sections of all West German households, collected by the Federal Statistical Office of Germany. Descriptive methods are used to separate age, cohort, and period effects just as the RCS enables us to use a linear model to shed some light on this issue. The analysis indicates that the relationship between income and expenditure is given but weak: The higher the income the looser the concrete expenditure structure in terms of real consumption is. All in all, the social organisation of consumption is a research object in itself to obtain information about the living standard of individuals and households.