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Income and Household Consumption Expenditure in Nigeria

Author

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  • Onanuga, Abayomi
  • Oshinloye, Michael
  • Onanuga, Olaronke

Abstract

The study estimates consumption function for Nigeria applying strictly “Absolute Income” hypothesis as introduced by Keynes. Formulating a model that specifies real consumption as a stable function of real income we applied Granger representation theorem so as to identify short and long run relationship. And our data set being the Gross domestic product by type of expenditure (proxy of income) and household consumption expenditure (both at constant 2005 prices - naira) for the period 1970-2011. The marginal propensity to consume MPC is ~0.64 and Nigeria’s autonomous consumption is estimated to be 1.93 trillion naira. Since Keynes emphasizes short run consumption function, the short run MPC (0.78) is less than APC (0.88), which makes it non-proportional, this complies with Keynes theoretical position but defies the long run consumption function of being proportional to APC as 0.64 is not equal to 0.88.

Suggested Citation

  • Onanuga, Abayomi & Oshinloye, Michael & Onanuga, Olaronke, 2015. "Income and Household Consumption Expenditure in Nigeria," MPRA Paper 83334, University Library of Munich, Germany, revised 30 Apr 2015.
    • Handle: RePEc:pra:mprapa:83334
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    References listed on IDEAS

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    Cited by:

    1. Victoria Kudaisi, Bosede & Akanni Olomola, Philip, 2021. "Effects Of Income Shock On Consumption Among Public Workers In Southwest Nigeria: Evidence From The 2016-2018 Economic Crisis," Ilorin Journal of Economic Policy, Department of Economics, University of Ilorin, vol. 8(2), pages 65-88, June.

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    More about this item

    Keywords

    consumption; gross domestic product; Nigeria;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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