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Household Budget Analysis for Pakistan under Varying the Parameter Approach


  • Eatzaz Ahmad

    (Quaid-i-Azam University, Islamabad.)

  • Muhammad Arshad

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


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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    Cited by:

    1. Khurram SHAHZAD* & Muhammad Nadeem SARWAR**, 2018. "Analysis of Food Demand Patterns of Sindh Province, Pakistan," Pakistan Journal of Applied Economics, Applied Economics Research Centre, vol. 28(1), pages 147-168.

    More about this item


    Consumer Economics; Empirical Analysis;

    JEL classification:

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

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