The income, consumer spending and wellbeing of Ukrainian households

Abstract This article is devoted to the refinement of factors determining the structure of Ukrainian households’ consumption spending and approaches to interpretation of shifts in such structure in context of population well-being. It contains analysis with using indexes of real volume of consumption, combined with the localization of causes determining fluctuations in relative prices by commodity group. The results of such analysis should create preconditions to clarify the contribution of certain industries and commodity groups in the dynamics of consumer welfare. For estimating the income and price elasticity of consumption by wide aggregated commodity groups the linear modeling was used. Authors have used quite simple linear additive function, the first element of which is close to Working function, and the second – a very simplified replacement of Theil proposed mathematical tools for incorporating relative prices into mentioned model. The elasticity coefficients, calculated on basic our model were compared with coefficients obtained by Seale Jr. and Regmi [1]. For five commodity categories, we also compared the actual indices of real changes in quantity of consumption with similar indicators, which were calculated on basis the elasticity coefficients, obtained in our and mentioned works. Elasticity coefficients are designed by Seale Jr. and Regmi [1] for “Food” and “Furnishings, household equipment and routine maintenance of the house” have demonstrated quite good explanatory power. But estimated figures for both models clearly deviate from the actual values, which were observed for “Clothing and footwear”, as well as for “Housing, water, electricity, gas and other fuels”. At last, we try to explain the causes determining such deviation of actual scale of consumption comparing with calculated on basis elasticity coefficients and create precondition for better understanding connection of observed change in consumption of such commodity group with level of population’s well-being.