Economies of scale in Russian household consumption: Are the benefits of living together changing?

Could the evolution of consumption patterns and the trend toward declining average household size lead to changes in the economic benefits associated with living together? To address this question, we test for the existence of the “Deaton—Paxson paradox” using data from the Russian Household Budget Survey for 2003—2023. We employ nonparametric analysis and econometric estimation of systems of seemingly unrelated equations. We find significant economies of scale in both food consumption and service consumption, including housing and utilities. Economies of scale in food consumption are stronger among wealthier households, which have greater opportunities to adjust and optimize their consumption patterns. By contrast, economies of scale in shared consumption of services are more pronounced among poorer households, reflecting the greater importance of housing and utilities in their consumption. The magnitude of economies of scale in food consumption remained relatively stable over the study period, whereas economies of scale in service consumption tended to increase between 2009 and 2020. We attribute this pattern to the development of the service sector and the fact that services can be shared among household members or consumed to a lesser extent when household members live together. Overall, although the development of the modern consumer economy makes living alone more convenient and attractive, the economic benefits associated with living together do not diminish over time.

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