Explaining trends in UK household spending

In this paper we model the changing distribution of household spending in the UK over the period 1978 to 1999 and explore the interpretation of remaining time trends in spending once changes in other observed covariates have been accounted for

A retail price index including the shadow price of owner occupied housing

How do house price changes affect the cost of living? The retail price index in the UK does not directly incorporate house price changes. In- stead it uses mortgage interest to capture the cost of owning a home. This is a useful method from many perspectives. However, from a con- sumer welfare perspective, while mortgage interest does capture the cost of a particular service, it does not capture the cost of housing services. The shadow price of housing captures the welfare cost to a household of changes in housing prices. In this paper we create a new shadow price index using RPI data and the shadow price of housing and investigate how replacing the mortgage interest with the shadow price of housing affects measures of the cost of living

Dynamic housing expenditures and household welfare

In this paper we develop a measure of current "expenditures" on housing services for owner-occupiers. Having such a measure is important for measuring the relative welfare of households, especially when comparing renters and owners and for measuring inflation. From a theoretical perspective expenditures equal the "shadow price" of housing services (the marginal rate of substitution between housing services and non-durable consumption) multiplied by the quantity of housing services consumed. In an idealised world, two simple measures of the shadow price are available; the user cost of housing capital and the rental price of an equivalent rental house. However, imperfect capital markets, risk aversion, the tax system, moving costs and systematic differences between houses available in the rental and owner-occupied sectors drive a wedge between the shadow price of housing and these other two measures. This paper contributes to previous research by calibrating a lifecycle model of housing investment and consumption to data from the UK Family Expenditure Survey and by developing measures of the shadow price of housing that take into account uncertainty in house prices, interest rates and incomes, dynamic life cycle choices, and liquidity constraints that depend on both income and house value

Valuing quality

This paper uses revealed preference restrictions and nonparametric statistical methods to bound a quality-constant price series for a good that changes quality over time. Unlike the more usual hedonic regression techniques for estimating quality-adjusted prices, this method does not require us to observe the changing characteristics of the good or to assume a particular functional relationship between these characteristics and quality. To place a bound on quality change using revealed preference conditions we assume that preferences are stable over time, that quality change occurs in one good or group of goods and that the direction of quality change is known

A non-parametric bound on substitution bias in the UK retail prices index

This paper uses revealed preference restrictions and nonparametric statistical methods to bound true cost-of-living indices. These are compared to the popular price indices including the type used to calculated the UK RPI. This is used to assess the method of calculating the RPI for substitution bias

Superhydrophobicity on hairy surfaces

We investigate the wetting properties of surfaces patterned with fine elastic hairs, with an emphasis on identifying superhydrophobic states on hydrophilic hairs. We formulate a two dimensional model of a large drop in contact with a row of equispaced elastic hairs and, by minimising the free energy of the model, identify the stable and metastable states. In particular we concentrate on "partially suspended" states, where the hairs bend to support the drop -- singlet states where all hairs bend in the same direction, and doublet states where neighbouring hairs bend in opposite directions -- and find the limits of stability of these configurations in terms of material contact angle, hair flexibility, and system geometry. The drop can remain suspended in a singlet state at hydrophilic contact angles, but doublets exist only when the hairs are hydrophobic. The system is more likely to evolve into a singlet state if the hairs are inclined at the root. We discuss how, under limited circumstances, the results can be modified to describe an array of hairs in three dimensions. We find that now both singlets and doublets can exhibit superhydrophobic behaviour on hydrophilic hairs. We discuss the limitations of our approach and the directions for future work

Consumption trends in the UK, 1975-99

How and why has the way in which the average British family spends its money changed over the past 25 years? Those are the key questions examined in this report, using data from the UK FES between 1975 and 1999. It looks not only at broad changes in total spending, but also at how the division of expenditure between basics and non-basics and between durable goods, non-durable goods and services has altered over time

London's congestion charge

On 17 February 2003, one of the world's largest and most ambitious plans to tackle urban congestion began, with the introduction of a congestion charge for central London. It is hoped that this £5 daily charge for many vehicles entering the Inner Ring Road charging zone will significantly reduce the level of congestion faced by those travelling into and out of central London both by private and by public transport. In 2001, almost 1.1 million people entered central London during the morning peak hours of 7.00a.m.-10.00a.m.,1 of whom around 150,000 (13.7%) used private transport. Whilst the total number of people entering during the morning rush hour has scarcely changed since 1991, there has been a small shift towards public transport: in 1991, 16.8% of people used private transport. Nevertheless, average traffic speeds in central London have fallen slightly over the last decade, with the average morning peak-period traffic speed for 2000-03 just 9.9 mph, compared with a peak of 14.2 mph in 1974-76. During the evening rush hour, average speeds are even slower, at just 9.6 mph. In evidence to the House of Commons Transport Committee,3 David Begg of the Commission for Integrated Transport argues that around 40% of the total national level of congestion occurs in Greater London. Transport for London suggests that "there are now no longer any "peaks" or "off-peaks" of traffic volume between 7am - 6.30pm" and states that there are now on average three minutes of delay for every mile that a vehicle travels inside the charging zone. This Briefing Note aims to provide a guide to the workings of the London congestion charge. We begin in Section 2 by describing the economic case for congestion charging, showing why congestion can be thought of as an urban example of the well-known overuse of common resources to which there is free access (the so-called "tragedy of the commons"). In Section 3, we move on to look at the details of the proposed charge for London, examining how it fits in with the economic framework we develop and discussing some of the work that has already been carried out to try to predict the likely effects of the charge. Section 4 looks briefly at the issue of what may happen with the projected net revenues from the charge, which are legally bound for the first 10 years to be spent on transport within Greater London. In Section 5, we discuss some of the empirical evidence regarding transport in London and present evidence on the potential distributional effects of the congestion charge, since one of the oft-cited criticisms of charging is that it will impact upon the poorest most severely. Section 6 goes on to look at the experience of congestion charging elsewhere around the world

Nonparametric methods for the characteristic model

Characteristics models have been found to be useful in many areas of economics. However, their empirical implementation tends to rely heavily on functional form assumptions. In this paper we develop a revealed preference-based nonparametric approach to characteristics models. We derive the minimal necessary and sufficient empirical conditions under which data on the market behaviour of individual, heterogeneous, pricetaking consumers are nonparametrically consistent with the consumer characteristics model. Where these conditions hold, we show how information may be recovered on individual consumer’s marginal valuations of product attributes. In some cases marginal valuations are point identified and in other cases we can only recover bounds. Where the conditions fail we highlight the role which the introduction of unobserved product attributes can play in rationalising the data. We implement these ideas using consumer panel data on the Danish milk market

Parental income and children’s smoking behaviour: evidence from the british household panel survey

Does money matter? When investigating health behaviour, research often finds a strong positive association between income and healthy behaviour. This could however be due to individual characteristics that determine both income and health investment and is not necessarily due to the role of money per se. In this study we look at this relationship over the generations by studying the association between parental income and children’s prevalence to smoke in Britain using data from the British Household Panel Survey and British Youth Survey. We find an inverse relation between parental income and children’s smoking prevalence, but when looking at within household changes by comparing sibling’s smoking status differences at the same age, we find instead a positive effect. This indicates that within household increases in income lead to an increased probability of smoking of a younger child