ECONOMIES OF SCALES IN EU HOUSEHOLD CONSUMPTION – SOME REMARKS BASED ON A COUNTRY-LEVEL ANALYSIS.

Economies of scale in household consumption generally occur as a result of joint consumption of public goods. In order to analyze this phenomenon expenditure shares on housing, which can be treated as a representative of the public good, and expenditure shares on food - representing private goods - are examined. The data used in this study come from the Eurostat database and cover the period between 2004 and 2012. Estimation of panel data models reveals that a large drop in food shares in post-communist countries was mainly due to rising household incomes. It is also found that an increase in housing shares was affected by the rising price of housing relative to other consumer prices in the EU-countries. Reducing differences in the considered components of expenditure structures make use in EU common equivalence scale in 2012 more reasonable than in 2004.