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Patterns of Income Induced Consumption of Selected Food Items in Bangladesh

R. K. Talukder
Associate Professor
Department of Agricultural Economics, Bangladesh Agricultural University, Mymensingh

Abstract/ Executive Summary:

Income elasticities and their evolutions were traced in respect of six selected food items - rice, wheat, potato, pulses, fish and edible oil - using the Bangladesh Household Expenditure Survey data of 1981/82. The results showed that except for wheat, all the selected food items were superior good for all the classes of households. While for rural households wheat was a non-preferred inferior, for urban households it was a preferred inferior good. There were little differences between expenditure and quantity elasticities, implying that the rich and poor used to pay the same price for the selected food items with respect to their income changes. The analysis with critical income level, which would indicate the turning point (zero income elasticity) of individual foods, revealed that except for oil, the range of income over which the food items would remain superior goods was wider for urban than for rural households

Keywords: Patterns,Income induced ,Consumption,Food items

Location:

Start Date: 00-00-1981

End Date: 00-00-1982

Program Area: Socio-economic and Policy

Non-commodity: Social status

Objectives:

The main focus of the analysis is derivation of the degree of response of both quantity of and expenditure on selected individual food items to changes in income (total expenditure) of disaggregate classes of people.

Methodology:

Description of the Data

The data used in this study were obtained from the nation-wide Household Expenditure Survey (HES) 1981/82 conducted by the Bangladesh Bureau of Statistics (BBS). The data were available for 67 districts separately for six income classes each in rural and urban locations. Thus a sample household represented the average of households in each district separately for rural and urban locations in each of the six income classes. Assuming that each rural and urban locations of 67 districts represented a unit of observation in each of the six income classes, the total number of observations comprising all locations and all income classes would be obtained at 67x2x6=804.

Theoretical Framework

In a demand function, the quantity of a commodity is usually taken as the dependent variable. However, for some commodities (like many food items) quantity represents a conglomeration of several types or varieties and therefore does not provide a unique measure of consumption of the commodity. Therefore, expenditure on the commodity is often taken as the dependent variable. If the item considered is homogeneous so that it is transacted at the same price, both quantity and expenditure on the item will yield the same results. However, in reality most food items are available in different varieties, sometimes with substantial price variations. Thus if people purchase more expensive varieties as a result of increased income, the choice of quantity as the dependent variable would underestimate the effects of income on expenditure patterns (Currie 1972, p.24).Estimation of the underlying Engel function requires specification of an income variable. As is well known, it is normally difficult to obtain accurate income data from the households. Therefore, total expenditure is often used as the proxy for income. As Houthakker and Taylor (1966) argued, .consumers have more control over their expenditures than over incomes, at least over short period of time. A more convincing argument is based on the permanent income hypothesis of Friedman. According to the basic tenets of 'Permanent Income1 (Friedman 1957) and 'Life Cycle1 (Ando and Modigliani 1963) hypotheses, consumers spread their income over the lifetime in such a way that consumption at a particular time of life is explained by the planned, desired and average consumption over the lifetime. Since income for a given time can contain positive and negative transitory components, a more appropriate income variable is the total expenditure which better reflects the permanent income of the consumers.

Source of Information: The Bangladesh Development Studies, Vol. 21, No. 1 (March 1993), pp. 41-53 Published by: Bangladesh Institute of Development Studies

Article Link (Online Journal):

Funding Source:

Total Budget (Tk.) :

Achievement/Findings:

The results obtained from the study have important implications for policy. The evolution of income elasticities indicated that while wheat was a non-preferred inferior good to the rural people, it was a preferred inferior to the urban people. The critical income analyzes reveal that while wheat remains a superior good over a small income range for rural consumers, for urban consumers it remains an inferior good over a wider income range. Thus if the policy goal is to induce consumption of low-cost calorie-cum-protein intensive food item like wheat among the poors, income policy does not seem to be an effective instrument. The income induced consumption of potatoes, however, seem to be relatively more promising among both rural and urban people. Selective price policies and promotional measures can go a long way in augmenting consumption of the low-cost nutrient-intensive foods by the poor consumers.

Knowledge Management: Journal