Fitting of Engel Curve: Rural Maharashtra
Fitting of Engel Curve: Rural Maharashtra
Managerial Economics I: Section D Group 6
Completed Under the Guidance of
Prof. Kaushik Bhattacharya
September 2011
Indian Institute of Management, Lucknow
Submitted on September 5th, 2012 Executive Summary
This study aims to estimate and analyze the relationship between the monthly per capita expenditure on food and the monthly per capita total expenditure for households in rural Maharashtra. This relation is estimated by using the Engel Curve Model which proves that as the income levels rise the percentage expenditure on food items decreases.
The National Sample Survey Organisation (NSSO) conducted an all-India survey of households and unorganised service enterprises in the 63rd round of NSS during July 2006-June 2007. Surveys on consumer expenditure are being conducted once in every five years on a large sample of households from the 27th round (October 1972 – September 1973). For this project Data from the 63rd Round of the National Sample Survey was used as a sample for analysis. The regression analysis was carried out using Linear, Working-Lesser and Double Log Models. The income elasticity was calculated in each case which confirmed the fact that food is a necessity good.
Qualitative factors such as seasonality, occupation and social group were also incorporated into the regression analysis using dummy variables. A multivariate regression analysis revealed the prominence of occupation as a relatively more significant factor compared to the others factors. The analysis is subject to certain limitations due to the assumptions made with the most primary assumption being that the total expenditure on all goods is representative of the income of the individual. Other limitations arising out of the content of the survey have also been listed.
Contents
Executive Summary 2
Introduction 4
Understanding the Data 6
Data Collection 6
Data
Managerial Economics I: Section D Group 6
Completed Under the Guidance of
Prof. Kaushik Bhattacharya
September 2011
Indian Institute of Management, Lucknow
Submitted on September 5th, 2012 Executive Summary
This study aims to estimate and analyze the relationship between the monthly per capita expenditure on food and the monthly per capita total expenditure for households in rural Maharashtra. This relation is estimated by using the Engel Curve Model which proves that as the income levels rise the percentage expenditure on food items decreases.
The National Sample Survey Organisation (NSSO) conducted an all-India survey of households and unorganised service enterprises in the 63rd round of NSS during July 2006-June 2007. Surveys on consumer expenditure are being conducted once in every five years on a large sample of households from the 27th round (October 1972 – September 1973). For this project Data from the 63rd Round of the National Sample Survey was used as a sample for analysis. The regression analysis was carried out using Linear, Working-Lesser and Double Log Models. The income elasticity was calculated in each case which confirmed the fact that food is a necessity good.
Qualitative factors such as seasonality, occupation and social group were also incorporated into the regression analysis using dummy variables. A multivariate regression analysis revealed the prominence of occupation as a relatively more significant factor compared to the others factors. The analysis is subject to certain limitations due to the assumptions made with the most primary assumption being that the total expenditure on all goods is representative of the income of the individual. Other limitations arising out of the content of the survey have also been listed.
Contents
Executive Summary 2
Introduction 4
Understanding the Data 6
Data Collection 6
Data