HOUSEHOLD CONSUMPTION BEHAVIOR IN PAKISTAN: EVIDENCE FROM ENGEL CURVE ANALYSIS USING PSLM (2018-19)

Abstract

This research aims to investigate household consumption behavior across rural and urban regions in Pakistan. The main focus of the study on the association such as, income, regional, demographic, and socioeconomic factors of food and nonfood expenditures. The 20 categories of commodities have been stressed, and data collected from the PSLM/HIES 2018-19. The econometric method, Ordinary Least Squares (OLS) used. According to Engel's law, as income rises, people tend to spend more on luxury goods, such as meats, fruits, and soft water, which are pretty inelastic, while spending less on raw foods such as rice, sugar, and oil. According to the results, there is a calcification of income differences, as Engel's law states that the part of expenditure on necessities such as rice, sugar, and oil with inelastic demand is directly inversely related to income. Besides, expenditure on luxuries such as meat, fruits, and soft drinks, classified as non-essential necessities, is inversely related to Engel's coefficient. All food groups and individual food items are subdivided into nonfood categories; thus, food, housing, fuel, and clothing become important expenditure categories, and housing elasticity stands out as the highest among the nonfood categories, illustrating the dominance of this category as incomes rise. The study results suggest the government to emphasis on food security initiatives and provide some region-specific interventions in Sindh and Baluchistan. This is aimed at alleviating the food insecurity through subsidies of the basic staples. Also, it is essential to enhance the access to nutrition-rich food items.