Income elasticity of expenditures on pets

The popular media contains many articles that cite an increase in pet ownership costs. However, limited econometric research has been done to examine consumer spending on pets.

The purpose of this study was to determine the income elasticity of spending on pets in the United States. Income elasticity of consumer expenditures on pets was determined using the log-linear or constant elasticity form. This logarithmic functional form was used to transform a non-linear relationship to a linear form.

A sample size of 32,462 consumer units (CUs)from the 1992 Consumer Expenditure Survey (CES) was used. The CES contained four pet-related variables (pet services, veterinary services, pet supplies, and pet food) and a research group of 8,380 CUs who spent on at least one of these pet-expenditure variables. Since some CUs spent on more than one pet variable, a total of 10,494 pet spending occurrences were used to calculate the income elasticities of the four pet-expenditure variables.

All four pet-expenditure variables were found to be income inelastic and no seasonal trend was apparent. This study also calculated the pet variable elasticities of CUs with children versus CUs with no children and no significant difference between the two groups was found. Income elasticities were also calculated for many other variables in order to compare results to existing research. The topics of measurement error, under-reported data, missing data, and Consumer Expenditure Survey research methodology are also discussed.

The results of this study indicate that people treat their pets as children. Income elasticities on pet-expenditure variables resemble spending on necessity items, not luxury or discretionary items. Many consumers who cannot afford pets have them hence financial planners should respect the intense emotions people have toward pets.