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