Decoding income through household spending: A microeconomic look at consumption and inequality

Households' economic positions are shaped not only by the resources they possess but also by how they allocate these resources across different areas of consumption and saving. This study examines whether household expenditure composition and socio-demographic characteristics provide information about households' relative positions within the income distribution. Using microdata from the 2022 Household Budget Survey conducted by the Turkish Statistical Institute (TurkStat), households' relative income positions with respect to the sample median income threshold are examined using a binary logistic regression model. The findings show that education, employment status, and saving behavior, as well as the budget shares allocated to key expenditure categories, are significantly associated with relative income position. Higher shares of education and restaurant expenditures are positively associated with relative income position, whereas higher shares of food, housing and rent, health, and housing maintenance expenditures are negatively associated with it. The findings suggest that household expenditure patterns can provide complementary micro-level information when assessing households’ relative income position.