Abstract
Household expenditure is the second prominent component of GDP for Kuwait, consisting of 43% GDP, and it has been moderately growing for the past decade. It is essential to understand the nature of household expenditure, a fundamental macroeconomic driver with immense significance for policymaking. This paper utilises the latest Kuwait Household Expenditure Survey data to study household expenditure patterns in Kuwait. It examines and compares the variation of household expenditure patterns for nationals (Kuwaitis) and expatriate households over nine different major commodity groups. The paper investigates the patterns of household expenditure and the response of their characteristics on the level of expenditure by employing Heckman two-step estimation method. The results suggest that different factors affect the probability of consuming a commodity and the level of expenditure between the two household groups. Kuwaiti’s expenditure is more responsive to food, housing, communication and recreation commodities and less responsive to clothing, health, transportation and restaurants than expatriates. In general, there is a significant variation of expenditure patterns across all commodities between the two household groups.
Highlights
Demand-led growth studies affirm that household consumption expenditure is a principal macroeconomic driving force
The results generally indicate that there is a significant variation between the two groups, which confirms the different impacts of household characteristics on consumption
Given the unique structure of the Kuwaiti population, the analysis was conducted on Kuwaiti and expatriate households separately, for comparative purposes
Summary
Demand-led growth studies affirm that household consumption expenditure is a principal macroeconomic driving force. Almost all economic activities are affected directly (demand-side) or indirectly (supply-side) by the level of private household expenditure, such that obvious impacts manifest in increasing or decreasing industrial production and employment levels (Tian et al, 2016; Setterfield and Kim, 2017). The importance on such phenomena has attracted the attention of several researchers investigating the expenditure patterns of households from a microeconomic perspective to provide policymakers with insights of the impacts of changes in prices, incomes and preferences on future household trends (Yusof and Duasa, 2010; Dybczak, Tóth and Voňka, 2014). Their study applied three different functional forms of Engel curves with only two variables; household size and total expenditure, using data from the 1986/1987 household budget survey to examine the differences in expenditure patterns between Kuwaitis and expatriates irrespective of calculating their elasticities
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