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The Demand for Services in India. A Mirror Image of Engel's Law for Food?

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  • Gaurav Nayyar
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    Abstract

    India's development experience over the past fifty years suggests that the increasing importance of the services sector deserves analysis.� The literature on structural change has emphasised changing patterns of demand as an explanation for the increasing importance of the services sector.� In order to establish the significance of private final demand as an explanation for the increasing importance of the services sector in India, this paper estimates Engel curve-type relationships for six categories of services: education, health, entertainment, personal, communication and transport.� In doing so, it uses Tobit and censored quantile regressions to analyse household survey data in 1993-94 and 2004-05.� We find upward sloping Engel curves which implies that there is a consistent increase in the household budget share allocated to services in the aggregate and to each individual services category as total household expenditure increases.� This is a powerful explanation for the increasing share of the services sector.

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    Bibliographic Info

    Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 451.

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    Date of creation: 01 Sep 2009
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    Handle: RePEc:oxf:wpaper:451

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    Related research

    Keywords: Services; India; Demand; Engel curves; Luxuries; Household survey data;

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    1. HÄRDLE, Wolfgang & JERISON, Michael, . "Cross section Engel curves over time," CORE Discussion Papers RP -991, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Gustavsen, Geir Waehler & Jolliffe, Dean & Rickertsen, Kyrre, 2008. "Censored Quantile Regression and Purchases of Ice Cream," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 6534, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Beatty, Timothy K.M., 2006. "Zero Expenditures and Engel Curve Estimation," 2006 Annual meeting, July 23-26, Long Beach, CA, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 21052, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Gustavsen, Geir Waehler & Rickertsen, Kyrre, 2004. "For Whom Reduced Prices Count: A Censored Quantile Regression Analysis Of Vegetable Demand," 2004 Annual meeting, August 1-4, Denver, CO, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 20172, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Geoffrey Lancaster & Pushkar Maitra & Ranjan Ray, 2008. "Household Expenditure Patterns and Gender Bias: Evidence from Selected Indian States," Oxford Development Studies, Taylor & Francis Journals, vol. 36(2), pages 133-157.
    6. Falvey, Rodney E & Gemmell, Norman, 1996. "Are Services Income-Elastic? Some New Evidence," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 42(3), pages 257-69, September.
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    Cited by:
    1. David Kaplan, 2013. "IDEAL Inference on Conditional Quantiles via Interpolated Duals of Exact Analytic L-statistics," Working Papers, Department of Economics, University of Missouri 1316, Department of Economics, University of Missouri.

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