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Household Budget Analysis for Pakistan under Varying the Parameter Approach

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Author Info

  • Eatzaz Ahmad

    (Quaid-i-Azam University, Islamabad.)

  • Muhammad Arshad

    (International School of Industrial Business Management, Shanghai University, China)

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    Abstract

    Using micro-level household data for rural and urban Pakistan, this study estimates Engel equations for 22 commodity groups with quadratic spline specification, in which the number and locations of knots are determined through a search procedure. The study finds that the resulting flexibility produces many interesting patterns of changes in the classification of goods into necessities and luxuries across income ranges. This suggests that a uniform tax structure will have varying implications for budget allocation and welfare of households belonging to different income classes. This information can be gainfully utilised in preparing income transfer policies that could supplement uniform tax regimes.

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    File URL: http://www.pide.org.pk/pdf/Working%20Paper/WorkingPaper-41.pdf
    File Function: First Version, 2007
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    Bibliographic Info

    Paper provided by Pakistan Institute of Development Economics in its series PIDE-Working Papers with number 2007:41.

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    Length: 29 pages
    Date of creation: 2007
    Date of revision:
    Handle: RePEc:pid:wpaper:2007:41

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    Keywords: Consumer Economics; Empirical Analysis;

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