Pakistan Institute of Development Economics

PDR

THE PAKISTAN DEVELOPMENT REVIEW 

Household Consumption Patterns in Pakistan: An Urban-RuralComparison Using Micro Data

This paper examines the household consumption patternsseparately for the urban and the rural sectors in Pakistan by estimatingthe marginal expenditure shares and expenditure elasticities, for twelvebroad commodity groups, using household level data for the year 1984-85.At the sectoral level, the marginal expenditure shares are estimatedboth with and without the ‘community effect’. Furthermore, by dividinghouseholds within each sector into different income groups,income-specific marginal expenditure shares and elasticities are alsoobtained. This level of disaggregation reveals much richer consumptionpatterns as compared to the ones based on grouped data. The estimatedmarginal expenditure shares indicate that in examining the householdconsumption pattems one can safely assume that all the households in thesample face the same price structure. While the fmdings of the papersupport the validity of Engel’s Law, the estimates presented indicatethat expenditure elasticities for different commodity groups vary withincome and, in general, exhibit a cyclical pattern, which is explainedin terms of quantitative as well as qualitative changes in thehouseholds’ consumption basket. For a majority of the commodity groups,both structural and behavioural differences in the consumption patternsare found to exist between the urban and the rural households.Furthermore, our results also confirm the existence of economies ofscale in the consumption of majority of the commodity groups. Thedegrees of these economies of scale are not only different acrosscommodities but also between sectors and across the income groups withineach sector.

Nadeem A. Burney, Ashfaque H. Khan

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