Engel's Law is named after the Prussian statistician Ernst Engel (1821–1896), who published his findings in 1857 based on budget surveys of Belgian working-class families. The regularity he identified is straightforward: poorer households devote a larger proportion of their total expenditure to food, while wealthier households spend proportionally less on food even when their absolute food outlays are higher. The income elasticity of demand for food is therefore positive but less than one.
The law has become one of the most durable empirical generalizations in economics, replicated across countries, time periods, and survey methods. It underpins several practical applications:
- Poverty measurement. The food share of household budgets is widely used as a welfare indicator. National statistical agencies, including the U.S. Bureau of Labor Statistics and Eurostat, track Engel curves to assess living standards.
- Cross-country comparisons. Economists such as Angus Deaton have used Engel curves to adjust purchasing power parity (PPP) estimates and to evaluate whether reported income data are consistent with observed consumption patterns.
- Development economics. Falling food shares are treated as a signal of rising prosperity; the World Bank and FAO use food-expenditure ratios when analyzing structural transformation in low- and middle-income economies.
Engel's Law is distinct from, though sometimes confused with, Engel curves more broadly, which plot expenditure on any good against income. Related regularities include Bennett's Law (as incomes rise, the share of starchy staples in the diet declines in favor of more varied foods) and Schwabe's Law (the share of income spent on housing falls as income rises, though this is empirically weaker).
For Model UN and policy researchers, the law is useful when arguing about food security, agricultural subsidies, inflation incidence (food-price shocks hit poor households disproportionately), and the political economy of development. It does not, however, predict the level of food spending, nor does it hold perfectly at very low incomes where subsistence constraints bind.
Example
When global food prices spiked in 2007–2008, analyses by the FAO and IFPRI invoked Engel's Law to explain why low-income households in countries such as Bangladesh and Egypt suffered disproportionately, since food already consumed more than half of their budgets.
Frequently asked questions
No. Wealthier households typically spend more on food in absolute terms; the law only states that food's share of total expenditure declines as income rises.
Keep learning