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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

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.

Suggested Citation

  • Gaurav Nayyar, 2009. "The Demand for Services in India. A Mirror Image of Engel's Law for Food?," Economics Series Working Papers 451, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:451
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    File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper451.pdf
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    References listed on IDEAS

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    1. Hardle, W. & Jerison, M., 1990. "Cross section Engel curves over time," CORE Discussion Papers 1990016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. 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.
    3. 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 20172, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. 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 257-269, September.
    5. 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 6534, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Beatty, Timothy K.M., 2006. "Zero Expenditures and Engel Curve Estimation," 2006 Annual meeting, July 23-26, Long Beach, CA 21052, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    Cited by:

    1. David M. Kaplan, 2013. "IDEAL Inference on Conditional Quantiles via Interpolated Duals of Exact Analytic L-statistics," Working Papers 1316, Department of Economics, University of Missouri.

    More about this item

    Keywords

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

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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