Rural-Urban Differences and the Stability of Consumption Function Behaviour

The paper presents an analysis of the entire data generated by the Household Income and Expenditure Surveys from 1963-64 to 1984-85. Using appropriate econometric techniques tests are conducted to determine the possibility of pooling rural and urban data to get overall estimates for different commodity groups in different years. The results verify Engel’s law of a decline in marginal food expenditures as income rises, and constancy in marginal expenditures on clothing, footwear and fuel and lighting. Tests for the similarity of yearly functions reveal that it would not be possible to pool the data for different years.