Personal Consumption and Personal Maintenance Estimates Using Empirically Based Expenditure Allocation Rules
Eric W. Christensen. 2022. Personal Consumption and Personal Maintenance Estimates Using Empirically Based Expenditure Allocation Rules. Journal of Legal Economics 28(1): pp. 3–46.
This study provided new estimates for personal consumption. Existing estimates from either the Patton-Nelson or Krueger methodology use expenditure allocation rules for self-consumption that are logical but which do not account for the heterogeneity of consumption patterns among household members for a given expenditure category. While these allocation rules are consistent with common sense, they are somewhat arbitrary because they are not validated empirically. Accordingly, this study’s primary contribution is to refine personal consumption estimates by developing empirically based self-consumption patterns that reflect the relative self-consumption patterns of men, women, and minors in a household. This study’s secondary contribution is to estimate personal maintenance (for which there are no existing estimates). While a self-consumption reduction is required in most states, states differ regarding whether the reduction should be what the decedent would have consumed (personal consumption) or necessary living expenses (personal maintenance). The results show that the difference between personal maintenance and personal consumption is generally between two percent and six percent. This study focuses on working households and excludes retired households. This focus is used so that personal consumption and personal maintenance estimates reflect the consumption patterns of the working households to which forensic economists typically apply the estimates. The data show that excluding retired households lowers the personal consumption and personal maintenance values.
Eric W. Christensen