The determinants of household expenditures in Savannakhet, Lao PDR: A Seemingly Unrelated Regression analysis

Household expenditure data are widely used for monitoring the quality of life of household living standards, household wellbeing and consumption/expenditure patterns. We raise three questions for the Savannakhet household: 1. “What are the determinants of the household’s food, education, health and transportation expenditures?” 2. “Does the East-West Economic Corridor or transportation sector significantly relate to the household’s food, education, health and transportation expenditures?” 3. What specific policies could be applied in Savannakhet province to improve household welfare and render consumption patterns more effective? To answer these questions, we test four hypotheses based on the previous literature and development theory on the significance and signs of the determinants of household expenditures using seemingly unrelated regression techniques. All four hypotheses are rejected. This important finding implies that the previous literature and broad economic theory are inadequate guides to development in the specific context of present-day Savannakhet; and that the type of research reported in this paper is often essential in developing economies if policies are to be correctly formulated.