Income Distribution and Its Effect on Food Expenditure, Non-Food Expenses and Savings in Households of a Developing Economy

Abstract

The study examined the income distribution and effects of income on food expenditure, non-food expenditure and savings of households. The survey data was used, and Gini-coefficient was derived from observing the income distribution across households of different income classes. Engel coefficient was used to estimate the income elasticity of the expenditure on food items. This study found significant disparities in the income of rich and poor households with a high Gini Index. Also, it found significant variations in food consumption patterns across different income classes. The proportion of food basket share of a household declined with an increase in income. Similarly, the proportion of the budget share of food items shifted to other non-food items with increased income. According to the findings, lower income households had a higher elasticity of food expenditure than higher income households, complying with Engel’s law. The results of this study are noteworthy because they would provide crucial policy recommendations and a foundation for future research.