Patterns in Household Demand and Saving.

Abstract

The changing structure of consumer preferences is viewed in this study as it evolves in a developing economy. Broad patterns in household demand and saving are identified using national accounts data for seventeen countries which span the development spectrum; per capita GNP is used as a classification index. Economic development is multidimensional, accompanied by phenomena such as urbanization, structural shifts in the composition of output and employment, and changes in the age structure and composition of the family. In order to take account of these aspects of economic development the authors also examine how demand and savings parameters respond to change in a number of socioeconomic and demographic variables, using household budget data from eight developing countries. The extended linear expenditure system is used as a model to estimate the responsiveness of both demand and saving to the allocation of total consumption expenditure at the margin, that is, marginal budget shares; to price and total expenditure elasticities; to marginal and average propensities to save; and to the elasticities of household saving with respect to changes in relative prices. Particular attention is paid to differences between rural and urban income and expenditures, and the central role of food prices. The authors also estimate parameters which may be said to represent subsistence expenditures.