Estimating Household Expenditure Economies of Scale in Iran

Households differ from each other concerning size, age, gender and other properties, and it is expected that households with different properties have different consumption patterns. In this study, economies of scale of Iranian households (Mashhad City) were estimated using Engel approach of food consumption and Barten approach for 8 different commodity groups. In Engel approach, economies of scale was equal for all the commodities, so the estimated economies of scale indicator was over estimated. In Berten approach, the indicator estimated more accurately, and it was different for commodity groups. The results showed that food, housing, clothing, transportation and communication have economies of scale. The smallest and the largest of economies of scale were related to food as a private and housing as a public commodities, respectively. Economies of scale for exclusive commodities and miscellaneous commodities were greater than one, and there was diseconomies of scale. Overall economies of scale indicator was equal to 0.79; it showed that 21% of absolute expenditure in larger households could be reduced without changing their standard of living. Acknowledgement : Thank yo