An intertemporal analysis of expenditure elasticities under three expenditure specifications for Sri Lanka

Maneka Jayasinghe, E. A. Selvanathan, Saroja Selvanathan

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    Abstract

    Household income has been identified as one of the major determinants of demand for household goods. In addition, other household characteristics, such as household size and composition are also found to be important factors that influence household consumption decisions. This study, using four waves (2006/07, 2009/10, 2012/13 and 2016) of Sri Lankan Household Income and Expenditure Survey data, estimates three different specifications (namely, household expenditure, per-capita expenditure and expenditure per equivalent adult) of a complete system of Box-Cox Engel curves to incorporate household size and compositional differences into the model specification. A comparison of elasticity estimates across the three specifications indicates that amongst the three, the best performing model is the one utilizing household expenditure. An intertemporal analysis of expenditure elasticities indicates that although the magnitude of expenditure elasticities has changed, the necessity or luxury classification of household commodities has mostly remained unchanged for the period 2006 − 2016 in Sri Lanka.
    Original languageEnglish
    Pages (from-to)6376-6392
    Number of pages17
    JournalApplied Economics
    Volume51
    Issue number59
    Early online date4 Jun 2019
    DOIs
    Publication statusPublished - 20 Dec 2019

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