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Household Budget Analysis for Pakistan under Varying the Parameter Approach

Author

Listed:
  • Eatzaz Ahmad

    (Quaid-i-Azam University, Islamabad.)

  • Muhammad Arshad

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

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.

Suggested Citation

  • Eatzaz Ahmad & Muhammad Arshad, 2007. "Household Budget Analysis for Pakistan under Varying the Parameter Approach," PIDE-Working Papers 2007:41, Pakistan Institute of Development Economics.
  • Handle: RePEc:pid:wpaper:2007:41
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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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    More about this item

    Keywords

    Consumer Economics; Empirical Analysis;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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