Engel Coefficient

The Engel coefficient is the proportion of income spent on food. It was given its name by German-born statistician Ernst Engel in the 19th century. In his original study on Belgian families, Engel observed that as a family’s income rises, the proportion of income spent on food declines. Consumption patterns of other necessary goods—housing, clothing, light, and fuel—revealed a constant proportion spent on these goods as income increased. The negative relationship between income and proportion spent on food has since been named Engel’s law. It has been found to hold across countries and across time and is one of the most important generalizations of consumer behavior.

Engel proposed that the proportion of income spent on food could be used as a measure of welfare for comparing ...