At the Origins of Engel Curves Estimation

This paper revisits Ernst Engel’s (1857) original article in which he systematically investigated the relationship between consumption expenditure and income. While he is mainly remembered today for the discovery of Engel’s law, we highlight how Engel addressed in a particular way the issue of the relation between statistical empirical analysis and economic theorizing. Inspired by an inductive methodology, Engel’s method to infer empirical regularities made no a priori assumption on the estimated functional form and anticipates many aspects of current non-parametric regression methods. Furthermore, Engel devised a quasi-behavioral theory of consumption centered on the concept of wants to justify and explain his empirical results which he used to asses population living standards. Although incomplete, Engel’s consumption theory tackles a much neglected issue in consumption theory: what accounts for the manner in which consumption patterns change as income rises. ∗Productivity Commission, Australian Government. Email: [email protected] ∗∗Max Planck Institute of Economics, Evolutionary Economics Group, Jena, Germany. Email: [email protected].