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The Demand for Housing, and Permanent Income, in Indonesia

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  • Daniel Shefer

    (Urban and Regional Economics, Technion-Israel Institute of Technology, Haifa, Israel)

Abstract

This study reports the results and conclusions derived from a data analysis of urban household expenditure on housing in Indonesia. The urban households were stratified by income group, urban size and urban location; in these respects, this study is unique. Household expenditures on housing were computed for each income group and subgroup (by urban size and location). Expenditure on housing is increasing at a faster rate than income (except in the very low income groups). The proportion of income allocated by the average household to housing ranges from less than 15 per cent to close to 25 per cent (the latter being found in the upper income group). Similarly, significant variations in household expenditures on housing are observed for urban size and location. In Jakarta, for example, the average household expenditure on housing is almost twice as much as in the small urban localities (fewer than 20000 inhabitants). This observation, however, must be mitigated by income distribution: average household income in Jakarta is almost twice that of urban households elsewhere in Indonesia. Estimates of marginal propensities to consume (MPC) housing, and of income elasticities of demand for housing, reveal that the MPC varies between 0.15 and 0.40, depending upon urban size and location. Similarly, the income elasticities vary from 0.80 to 1.20, depending upon urban size and location (in Jakarta, for example, the estimated income elasticity was found to be 1.24).

Suggested Citation

  • Daniel Shefer, 1990. "The Demand for Housing, and Permanent Income, in Indonesia," Urban Studies, Urban Studies Journal Limited, vol. 27(2), pages 259-272, April.
    • Handle: RePEc:sae:urbstu:v:27:y:1990:i:2:p:259-272
    DOI: 10.1080/00420989020080211
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    References listed on IDEAS

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