scpi final report 2010

2010 Report

Student Consumer Price Project

2010 Report



Student Consumer Price Index | 1

Contents

1. Acknowledgments

2. Foreword

3. Statistical Summary

4. Are Economics Students More Economic?

5. Girls vs. Guys, Who is the Big Spender?

6. Alcohol and Hours of Study

7. The Lifestyle and Habits of an LSE Postgraduate

8. Closing Summary

LSE Economics Society Sponsors

2 | Student Consumer Price Index

Acknowledgments

Data Handling Team 2010

Maciej Lisik Head

Ruth Chiah Head

Kin Cheung

Jin Dong

Anahit Kostandian

Matthew Leung

Daria Plotnikova

Reporting team 2011

Nicholas Jaroszek Head

Yan Ping Sharon Chen

Nikki Patel

Chung Cher Yuen Wing

Econometrics team 2011

Shalini Mittal Head

Yao-Ming Eng

Dan Wales

Bahar Sezer

Qasim Mahmood

Data Handling Team 2011

Jake Roth Head

Nikhil Varadharajan

Anothony Lui

Anuneha Uniyal

William Matcham

James Wei


Foreword

Dear Reader,

After a year-long break, and my sincere apologies for that, here comes another report about

the expenditure habits of LSE students in the year 2010. With new people and fresh

enthusiasm in the team this year, we hope to bring you up-to-date on where and how LSE

students are spending their money. For those of you who are not familiar with the SCPI, here

is a brief introduction to how SCPI started, how is it organised, and a brief summary of what

all interesting results we found for the year 2010.

The project was initiated in early 2008 by Serena Tang and Avnish Srivastava (both since

graduated). They thought it would be interesting to investigate and calculate how inflation

affects LSE students in particular and were surprised that no such index existed. On

consultation with the Economics Department, they recruited some others towards their cause

and started looking into how they could possibly seek to construct this index. Unfortunately,

due to lack of sophistication of data collected last year, we were unable to calculate the cost of

price index for the year 2010. However, we will be calculating this and publishing it in our

next forthcoming report which will be due at the end of Lent term.

Nevertheless, we managed to come up with several interesting and significant results. There is

no significant difference in the expenditure behaviour of males and females when we looked

at their aggregate expenditure. However, on breaking down their total expenditure into

individual categories, we found many significant results. Similarly, we found that

postgraduate students tend to spend more on alcohol than undergraduates even though

alcohol constitutes only one percent of their expenditure. One very surprising and

astonishing result we found was that economic students in particular spend significantly less

on clothing and personal care than students in other departments.

Collecting data and analysing the results and finally reporting them have been the result of a

joint effort by the SCPI team. The SCPI project is divided into three teams, specifically the

data handling team, the econometrics team and the reporting team. There are over 16 people

working on the project this year. I would like to thank them all for their effort and for the

enthusiasm and support they have shown in the completion of this report. Credit should also

be given to the SCPI team of the last year who collected the data and processed it. We hope to

improve the standards of data collection this year and come up with more robust results.

Until then, enjoy these results!

Warm Regards,

Shalini Mittal

SCPI Team Leader


Statistical Summary Nicholas Jaroszek

In 2010, 49 students submitted expenditure data to the SCPI project – a fall of approximately

16% on 2009. Males and females both represented exactly 50% of the sample, and the average

age of respondents was 22 years, indicating a skew towards older LSE students.

Undergraduates made up 42% of respondents, 10% were General Course students, and the

remaining 48% were Postgraduates. There was an approximately equal split between students

who lived in private accommodation, catered halls, and non-catered halls. UK students made

up 19% of the data set, students from the rest of Europe made up 23%, students from Asia

made up 42%, North Americans made up 15%, and there was 1 student from South America,

who made up the remaining 2% of the data set. Only 12.5% of respondents had a part-time,

paid job and the most common ranges of hours of study per week were 10-20 hours and 20-30

hours. 29% of respondents considered themselves to be ‘in a relationship’. 19% of respondents

said that they did not cook. Approximately 40% of respondents were in the Economics

department.

Compared with the 2009 sample, UK students are much less represented – in 2009 they made

up approximately 50% of the sample. The 2010 pattern more closely resembles the LSE

student body as a whole. The 2010 data includes a much more equal ratio of Undergraduates

to Postgraduates. In the 2009 data, Undergraduates outnumbered Postgraduates by 4:1,

whereas in the 2010 data, the ratio is close to 1:1. In 2010 there was also less of a skew towards

students in the Economics department, who made up 40% of the sample compared to 50% in

2009.

Notable patterns include the proportion of expenditure on Rent – 47%, approximately equal

to the 52% in 2009, the considerable proportion of expenditure on Transport, especially

compared with, for example, food, and the very low proportion of expenditure on Catering

(Alcohol) which represents alcohol purchased in bars, pubs etc.

Category 1 -Groceries - Food

& Drinks8%Category 2 - Alcohol

& Tobacco5%

Category 3 - Clothes & Personal Care

3%

Category 4 -Rent47%Category 5 - Utilities

5%

Category 6 - Other9%

Category 7 -Transport

10%

Category 8 - Education

3%

Category 9 -Catering (Food)

9%

Category 10 -Catering (Alcohol)

1%% of weekly spending


Are Economics Students More Economic?

Are economics students badly dressed? Nikki Patel

Of total expenditure, just 3% is spent on clothes and personal care. Taking a closer look at

this expenditure we found that economics students typically spend less compared to a

combined group of all other departments on this category. To be precise the results indicate

that economics students spend approximately £39 less than students from other

departments on clothes and personal care and this is significant at the 5% level. Although,

as can be seen in the boxplot, there were 4 outliers in total these do not affect the

significance of the results, which remain significant at the 5% level of significance even after

omitting these outliers.

Perhaps this result is a reflection of their more studious nature, which means they have less

time for shopping – they value time spent shopping less than the utility they gain from

studying economics or doing something else more stimulating than shopping. However,

with the growing popularity of internet shopping the opportunity cost of time spent

shopping could be greatly reduced and may even encourage economics students to increase

their expenditure on clothing. Or, a more crude reason for these results could be that

economics students are more economic, in that they spend less on more expensive clothing,

thus giving rise to a significantly lower expenditure on clothing and personal care products

compared to students from all other departments.

10

300

250

200

150

100

50

0

ECON

Ca

teg

ory

3 -

Clo

the

s &

Pe

rso

na

l

Boxplot of Category 3 - Clothes & Personal


The boxplot shows that the median female student spent approximately £10 during our

representative week, although this spending is clearly skewed to the right. This dispersion

represents a tendency for female economics students to vary in their expenditure choices

from the median at higher levels of expenditure. The 4 outliers represent extreme spending

on clothing and personal care for females and males with respect to their groups (median)

distribution. Male students spend very low, almost uniform amounts of money on this

category, whilst female students are more varied in their expenditure as shown by the

relatively larger inter-quartile range. This may be the result of varying degrees of fashion

choices which females are generally more interested in, or perhaps because of varying

importance placed on personal care, and accordingly different budgets put aside for such

expenditure within the gender groups.

However, we obtained only 49 observations in total which may contribute to low

explanatory power and a low R2 (=0.089). In addition, the regression was very simple and

did not include controls which could affect the accuracy of the estimates. For instance, we

could improve the regression analysis by comparing the economics students’ personal

expenditure to those in specific departments, and with a sufficiently large sample we could

draw robust conclusions as to whether academic background determines consumption on

clothes and personal care, and more interestingly, whether personal characteristics have any

impact on this choice of expenditure.

Bearing in mind these observations that economics students are badly (or just cheaply)

dressed, raises the question of what else this group are spending money on, which would be

a point for further research.


Girls vs. Guys, Who is the Big Spender? Cher Chung

What exactly goes on in the wallet of an average LSE student? We try to save as much as we

can, living as we are on a student budget. But are our efforts actually helping to save the

wallet becoming empty quickly? With 52% males and 48% females in the sampled

population, the life of the average pound is an interesting one. One intriguing question is,

who is the big spender? The girls? Or the guys?

The regular male shelled out around £1000 on average in a particular sampled week. There

were even 2 outliers where the expenditure per week in one case was well over 3000 GBP

and in the other case over £4000. Of course, it is possible that those 2 students happened to

have made a few out-of-character and exceptionally big purchases during that week, such as

getting a laptop or splurging on a few rare posters. But before you get too shocked,

remember that this amount included the weekly rent of Halls of Residences or private

accommodation as well. With an average range of around £700 to £1500, around £500 being

the minimum amount spent and around £2200 being the maximum, the expenditure of

males per week does not seem to be too much.

Contrary to popular belief, women don’t actually spend much more than their male

counterparts. At least, it is true for those at LSE. According to our findings, there is no

4000

3000

2000

1000

0

Female

tota

l e

xp

en

dit

ure

Male

Boxplot of total expenditure

Panel variable: Gender

8 | Student Consumer Price

significant difference between the amount spent

compositions of the weekly expenditure by male and female students are quite interesting

though. Female and male students seem to spend similar amount of money on the

food, alcohol and tobacco. However, female students seem to spend significantly more on

clothes and personal care products. Well, that is not exactly a surprise. Every girl knows

exactly how soothing retail therapy for clothes and make

messy break-up. Male students, on average, spend

most interesting is that this same group of male students spends significantly more on

transport. This is quite surprising, since one would

the extra mile than guys. One possible explanation can be that there are more female

students staying in halls of residence or private accommodation that are near LSE, although

we do not have concrete data that sup

lose the extra pound by doing some exercise.

rice Index

significant difference between the amount spent per week by male and female students. The


though. Female and male students seem to spend similar amount of money on the



exactly how soothing retail therapy for clothes and make-up can be after a nasty essay or a

up. Male students, on average, spend £35.99 less than female students. What is


transport. This is quite surprising, since one would expect girls to be more reluctant to walk



we do not have concrete data that supports that hypothesis. Or maybe the girls just want to

lose the extra pound by doing some exercise.

by male and female students. The


though. Female and male students seem to spend similar amount of money on their rents,



after a nasty essay or a

35.99 less than female students. What is


expect girls to be more reluctant to walk



ports that hypothesis. Or maybe the girls just want to


Alcohol and Hours of Study Nicholas Jaroszek

The 2009 data produced several interesting results regarding alcohol and tobacco, and their

relationship with hours of study.

First of all, regression analysis found that male undergraduate students who do not cook

will, in an average week, spend £73 more on alcohol and tobacco than female undergraduate

students who do not cook. This is most likely to reflect cross-gender trends in alcohol and

tobacco consumption, but is not significant at the 5% level.

Something that is significant at the 5% level is that female Postgraduate students who do

not cook will, according to the econometrics, in an average week spend an extra £123 on

alcohol and tobacco compared to their undergraduate peers. Although there is a fairly wide

95% confidence interval for this result, we can be reasonably sure of it qualitatively, if not of

the precise figure. Considering that another result of the data was that postgraduates on

average have more than double the disposable income (using predicted monthly

expenditure as a proxy) of undergraduates, one may posit the explanation that the extra

spending on alcohol and tobacco reflects an income effect for luxury goods.

Interestingly, the econometrics also implies that female undergraduates who cook spend, on

average, £200 less per week on alcohol and tobacco than their non-cooking counterparts.

This is significant at the 5% level. However,

considering a relatively low R2 value for the

regression (0.19), there may be external factors

which explain this.

Another notable result concerned the

relationship between hours of study and

spending on alcohol and tobacco. The result was

that on average, students who spend between 0

and 10 hours per week studying spend £155 more

per week on alcohol and tobacco than students

who spend more than 10 hours per week

studying. This is significant at the 5% level,

though a rather wide 95% confidence interval

implies that one should be careful in placing too

much trust in this relationship. In fact, it is even

possible (though very unlikely) that students who

study for less than 10 hours per week actually

spend less than students who study for more than

10 hours per week. Also, the R2 value for this

regression is particularly low (0.08). This implies

that there are likely to be significant external


factors which can explain the relationship.

How then can we explain the result? One explanation is that students who study for less

than 10 hours per week spend more on alcohol and tobacco simply because they do not

study much. Perhaps they have so much more free time than other students that they drink

and smoke instead. However, it seems more likely that causality runs the other way –

perhaps students who do not study much do so because they are spending more on, and

therefore presumably consuming more of, alcohol and tobacco. Extra alcohol in particular

seems likely to reduce hours spent studying. A third explanation, which must be considered

due to the low R2 value, is that an external factor, or several external factors, can account for

both the extra alcohol and tobacco spending and the low hours of study. One somewhat

controversial candidate may be the carrying-out of internships or work experience amongst

career-focused students. Such students may see little need to study, believing themselves to

have secured employment (and therefore future income streams) upon leaving the LSE, and

choose to enjoy themselves by spending more on alcohol and tobacco instead. Another,

perhaps more likely explanation may be the degree of involvement with student societies,

especially sports clubs. There has long been an assumed relationship between membership

of the Athletics Union, alcohol and tobacco consumption, and low hours of study amongst

LSE students. If this is true, then perhaps it is showing up in the data.


The Lifestyle and Habits of an LSE

Postgraduate Sharon Chen

According to the LSE website, postgraduates make up 58.5% of the student population

(27.5% female, 31% male). Any study of student consumption means they deserve a special

focus.

In general, postgraduates are older than undergraduates. They have already completed one

degree, and were willing to commit to finishing another; the assumption is that

postgraduates are comparatively more serious about their studies. Many are even returning

students after holding a job and living independently for several years. With this basis, I

assume that they would have picked up some basic cooking skills, such as boiling pasta or

making sandwiches. However, as many have had a steady source of income that allowed

them to save, they have a larger budget than undergraduate students. They are more willing

to spend more money on what they consume, rather than wait for the Hare Krishna guy

every day or go shopping in Tesco’s bargain bins. Thus overall spending on food and drink

should be higher for postgraduates.

A look at the data supports this argument at the 5% level of significance. Being a

postgraduate causes spending on food and groceries to increase by £41. Whether this is due

to buying more expensive items at the grocery store (such as organic or fair trade), or

whether this is due to eating out more often is unknown. There are two things to consider.

Those who studied for advanced degrees are more likely to buy environmentally friendly or

sustainable products than the average population. Also, LSE has a highly international


student body, many of whom are living in London for the first time and are willing to spend

money to explore its bars and restaurants.

In addition, postgraduates spend £123 more on alcohol and tobacco each week. However,

the same regression showed a negative relationship between consumption and cooking. For

every person that cooks for themselves, there is a decrease of £200 in the purchasing of

alcohol and tobacco. It may be that there are two types of postgraduates: the ones who live

healthy and the ones who live well. Or perhaps everyone is smoking to lose weight.

So what does this all mean? At the moment, not much. This report is highly unlikely to

change the spending habits of any postgraduate who reads this. However, it does bring up

questions for further studies, such as whether higher spending on food is due choosing

more expensive options or eating out at pricier places.

Note: all the statistics used above is derived from 49 samples. If you are a postgraduate who

objects to the size of the sample used, then please recruit your friends and participate in the

SCPI survey this year.


Closing Summary Sharon Chen

This article marks the end of the 2010 SCPI report. Thus far, we have looked at gender,

degree, and consumption habits of LSE students from last fall. Along the way, we have

discovered that

Students in the economics department spend much less on clothing than students

from other departments.

There are no significant differences between men and women in terms of average

weekly expenditure.

Students who study less are likely to spend more on alcohol and tobacco.

Some postgraduates spend more on food, alcohol, and tobacco than undergraduates.

These are all interesting results, and significant at the 5% level. However, it is clear that

more detailed studies are required to get a better picture of student spending. It may also be

interesting to look at whether these trends change over time.

Some of the figures for weekly expenditure quoted in the articles above sounded

impressively large, however it should be put into context. London is one of the most

expensive cities in the world; that is one of the reasons why this study was started. In

addition, many students at the LSE are planning to work in the financial services, consulting

industries or other such lucrative industries; perhaps we are simply seeing Milton

Friedman’s permanent income hypothesis in action.

scpi final report 2010

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