CONSUMPTION PATTERN AND LIVING STANDARD OF HOUSEHOLDS IN FATA

Consumption pattern is the combination of qualities, quantities, acts and tendencies characterizing a community or human group’s use of resources for survival, comfort and enjoyment. By analyzing consumption pattern, one becomes able to know about the distribution of consumption expenditure among different articles that can be grouped among necessities, comforts and luxuries. The distribution of income among these three categories reflects the living standard in a region. A region would have a high living standard if its expenditure on luxuries is higher and in a poor region, highest percentage of income is spent on necessities. There are certain other indicators like also for the determination of poverty and economic development while pattern of consumption and living standard is important one among them. The main idea of this study is to determine the overall consumption pattern and living standard in the Federally Administered Tribal Areas of Pakistan.

FATA constitute the western border of Pakistan with Afghanistan. FATA being far-flung and mountainous area is neglected by the Govt for decades. The people are living ordinary life without any awareness for education and further development. Majority of them are living under absolute poverty. By analyzing consumption pattern, consumption and saving functions will be determined. Also, by completion of this study, the extent and composition of poverty will be determined. This will help Govt to know about the relative importance of different goods consumed in the study area. Also this study will provide information on current condition of households in the area which will help the planners in devising certain schemes to reduce the extent of poverty in this area. Moreover, the problems regarding consumption and living standard will be identified and the solutions will be suggested according to the conditions of the area.

1.1 MAIN OBJECTIVES

The study has the following main objectives:

To assess the Socio-economic conditions of the households

To examine the association between consumption expenditure and variables such as income, education and occupation

To find consumption expenditure elasticity of items

To identify the item wise spending of the sample households

To compare average consumption with average national consumption

To determine the living standard by estimating the linear consumption function and finding the Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS).

1.2 HYPOTHESES

In the light of above objectives the following hypotheses will be tested:

1 Marginal propensity to consume in FATA is greater than Pakistan

2 Higher the dependency burden, more will be the chance of being poor

3 Education has a direct bearing on consumption

4 Elasticity of demand for necessities is greater than at National level

2 RESEARCH METHODOLOGY

2.1 RESEARCH INSTRUMENT

A comprehensive interview schedule addressed to the Household Heads will be evolved. The schedule will pertain to the following information from the sample households.

A Social factors and information will be obtained from the respondents

B Eonomic conditions of the sample households will be included

C Expenditure on different goods and services by the respondents will be gathered .

2.2 SAMPLE SIZE AND ITS DISTRIBUTION

The whole Khyber Agency has three tehsils, namely Landikotal, Bara and Jamrud. It is therefore assumed that a small sample from each tehsil will be used as representative for the whole Agency. So it is proposed that a total sample size of 150 households will be selected from the whole Agency. Six villages, two from each tehsil will be randomly selected. The households will be listed and numbered in those six villages. This list will serve as a sampling frame and all the households will constitute the universe of the study. Furthermore, systematic sampling will be used because of the nature of the study, and the data will be directly collected from the respondents. As far as distribution of the sample size is concerned, the sample will be allocated to each tehsil on the basis of the size of population. Heads of all these households will be interviewed and the relevant information for the years (Jan-2005 to Dec 2009) will be obtained directly from the respondents.

2.3 ANALYTICAL TECHNIQUE

Most of the analysis will be based on the primary data. Therefore appropriate tables; percentages and averages of different variables will be used. In addition to these techniques, the following quantitative approaches will also be applied.

To determine the MPC and MPS, according to the psychological law of consumption, developed by Keynes(1936), the following Linear Consumption functions will be estimated for tehsils and total Khyber Agency;

Ci = Ca + cyi+Ui

Moreover the following multiple regression on different consumable items will also be estimated;

C = ßo + ß1 x1 + u1

Where;

C = Consumption

X1 = Total income

X2 = Family Size

X3 = Number of Literate members

X4 = Sum of others

For testing the significance of parameter estimates, , F-Ration and t-test statistics will be used.

4. ORGANIZATION OF THE STUDY

The first chapter will highlight Introduction of the study. The review of literature will be given in Chapter 2. The demographic features of the sample households will be analyzed in Chapter 3. Chapter 4 will focus on the budgetary position of the sample household. The consumption pattern and standard of living will be determined in chapter 5. The main findings conclusion and suggestions will be presented in the last Chapter 6. The text will be followed by appendices, tables and annexers. References will be placed at the end of the study.

5. LITERATURE REVIEW

The importance of review of literature lies in the fact that it highlights the main findings of the similar and relevant research studies that are completed by the researchers in the past. Some of the available literature shows that studies relevant to this study have been undertaken.

Astorga , et al (November 2005) studied the period between 1930 an 1970 and found that there was increased state intervention and restrictions on trade in the Latin America and there was a consistent rise in consumption of the households. At the start of that period, Argentina and Chile developed comparatively more while Brazil and Mexico showed the best performance at the end. There was convergence among developed countries but divergence from poor economies. Life expectancy of these economies improved but convergence didn’t take place with the US economy, also their per capita incomes improved in comparison with Asian and European economies. In the period, there was rapid industrialization, increase in urbanization and provision of trainings regarding basic health which resulted in advances in living standards. On the other hand, lack of economic resources and relevant fiscal policies undermined advancement in living standards.

Benito (May 2004) analyzed job insecurity effect on consumption. in his research, he studied British household using precautionary saving models through microdata. It was evident that consumption is severely affected by job insecurity. He found 2.7%reduction in consumption with a one standard deviation rise in risk for unemployment while 4 standard deviation rise in risk results in 11% decrease in consumption. In consistency with precautionary saving model, the effect was more powerful for young individuals who were new in the job market. He further concluded that purchase of durable goods was considerably postponed by job insecurity. Taking other things constant, the job insecurity affects aggregate demand via durable and non-durable expenditure.

Bover (October 2006) investigated wealth effects on consumption where he studied the direct effect of asset holding on consumption. He conducted his study across different age groups. He investigated wealth effects due to precautionary motives only. Basically he studied housing wealth and its effects on consumption pattern. Prime age households face highest housing wealth effect. In contrast, owners who occupy house face the largest wealth effect, secondary housing is the next and those with financial wealth face smallest or no effect.

Celinkutty and Joseph (Nov2003) analyzed the Households’ Consumption Expenditure Pattern of Kerala. They revealed that the Monthly Per Capita Expenditure of scheduled castes population in rural Kerala was lower than that of the general population. Average household size was found to be higher in rural sector for Scheduled Caste in Kerala as well as all-India. The per capita expenditure of Scheduled Castes of rural Kerala was found to be much lower than that of general population. The study revealed that the levels of livings of the Scheduled Castes were far below the expectations. Large percentage of the Scheduled Caste belongs to the lower income groups. The consumption standards of the majority of Scheduled Castes were found much below that of General population. Effective implementation of economic upliftment Schemes and Minimum Wage Act in case of agricultural laborers were recommended for improving their consumption standards.

Firpo (April 2000) analyzed the grouped Brazilian families on the basis of cohorts and education and made a comparison for consumption and income inequalities. For period 1986 to 1996, there was a boost in income and consumption inequalities in majority of cohorts. For families headed by less educated person showed consumption as well as income dispersion while for families with young and educated heads, there was a rise in consumption dispersion despite the decrease in income dispersion.

Haig and Andersen (December 2007) investigated the differences in the estimates that are used for comparison of real income trends among different economies. They analysed data for the period 1900 to 1939 for Austrslian economy and made a comparison with UK and US economies. They came on to the conclusion that the main differences in real incomes estimates are due to the lack of official data.

Horowitz (Feb 1993) standard growth and development model reveals that a consistent rise in consumption brings development with itself. Due to variation in the requirement of the stock to become productive for different factors, the theory may be partially affected. In his model, he analyzes optimal investment and consumption streams in contrast with the use of traditional and modern technology in the economy. In his model, there is a distinct phase of reduced aggregate consumption during the final stage of transition from traditional to modern economy.

Paramaiah (April 2006) analyzed household’s living standards in the province of Andhra Pradesh. In the developed west Godavari district, average income and consumption were the highest, Prakasam district was next and Srikakulam district was the worse among the three. Srikakulam district was comparatively better-off in agricultural resources but culturally and socially backward, therefore their farm incomes and consumption were operating at low levels in comparison to other districts.

Pujari (2004) investigated the household consumption pattern in rural and urban Orissa during 1999-00 for a basket of twelve commodities and estimated the corresponding Engel functions with Working-Leser methodology. He found that both in rural and urban areas, cereals, edible oil, vegetables, spices and fuel & light are found to be treated as necessities. Additionally, he found that pulses and beverages were necessities in urban areas. On the other hand, egg, fish & meat, sugar, education and medical were found to be luxuries in both areas. He observed differential impact of household size on household consumption pattern in rural and urban regions. Furthermore in rural areas, income effect dominated the specific effect in most cases, where as the converse was true for urban areas. His study emphasized that difference was due to the inherent structural difference for the reason of various demographic and social factors. He demonstrated that the factors like occupational status, religion and social groups were helpful in explaining the variation of budget shares of the commodities in most of the cases.

Visaria (1980 tried to test the statement that despite of the increase in average incomes, the poor are becoming poor both absolutely and comparatively. For this purpose, he analyzed data from 67 transition and developing economies for the period 1981 to 1994. He found that there was no correlation between changes in average living standards with inequality and polarization. He found that growth has positive impact on income distribution. Over the period, the poverty reduced by a small amount in these different regions, it decreases with improvement in living standards and vice versa. But during the period, absolute poverty reduced across the regions. In conclusion, the poverty reduces with increase in the average living standards.

A research study conducted by African Journal of Food Agriculture and Nutritional Development (AJFAND), (2005) analyzed the pattern of vegetable consumption of households in selected localities in the old Rivers State (now Rivers and Bayelsa States). Areas studied were Port Harcourt the State capital, Igwuruta, Ahoada and Kaiama. Results showed that mothers consumed 59 ± 0.45g to 130 ± 2.04g/person/day of vegetables between the months of May and July, the peak season of vegetable production. Factors that influenced vegetable consumption was found to be chiefly season and culture. Other factors were availability/price for 43.8% of households in Kaiama, a riverine community, while taste and nutrition knowledge wielded minor influences. Leafy vegetables were consumed at least four times per week in Igwuruta and Port Harcourt, while households in Ahoada and Kaiama, where culture had strong influence, consumed them only occasionally. Vegetables consumed were mainly pumpkin leaves (Telfairia occidentialis) and okra (Abelmoschus esculentus) in areas where season played a strong role. In areas where culture had a strong influence, bitterleaf, a leafy vegetable that undergoes rigorous process of squeezing and washing and is only scantly used in soups, was the vegetable of choice. Other vegetables less frequently consumed were Amaranthus hybridus, Pterocarpus spp., Gnetum africanum and Piper guineense leaves. These were used chiefly in various soup dishes eaten as accompaniments with the starchy staples. Other dishes in which leafy vegetables were consumed were pottage in those areas of high vegetable consumption, and occasionally in stew by all households investigated. Household size of 5 to 8 persons consumed their soup dishes between two and four days, while larger households of nine and above ate their soups in one day. However, households with deep freezer facilities stored their soup dishes for up to seven days. In spite of the reasonable consumption of vegetables during the peak season of production, reports of micronutrient deficiencies in Nigeria are rife, indicating a need for intervention. Possible reasons for the high prevalence of micronutrient deficiencies are seasonal variations in vegetable production, inadequate processing and preservation of vegetables for all year distribution and culture that may limit adequate consumption of leafy vegetables even when they are in abundance. This situation underscores the need for nutrition education; coupled with a program on dietary diversification to create awareness, increase production, processing, preservation and consumption of vegetables.

In the current study, the household consumption pattern will be analyzed in the highly focused region of the world today. In this study, the reason for the poverty and backwardness will be analyzed. Also suggestions for the improvement of the households will be provided.

REFRENCES

[1] Astorga, P., Berges, A. R. and Fitzgerald, V., (November 2005), The Standard of Living in Latin America During the Twentieth Century, Economic History Review, Vol. 58, No. 4, pp. 765-796.

[2] Benito, A., (May 2004), Does Job Insecurity Affect Household Consumption?. Bank of England Working Paper No. 220.

[3] Bover, O., (October 2006), Wealth Effects on Consumption: Microeconometric Estimates from a New Survey of Household Finances. CEPR Discussion Paper No. 5874  

[4] Celinkutty, M. and Joseph, M. T., (Nov2003), Consumption Expenditure Pattern of Scheduled Caste Households of Kerala: a Study of Idukki District.

[5] Firpo, S., (April 2000), Consumption Inequality Life-Cycle Among Brazilian Households (A Evolucao Das Desigualdades de Renda e de Consumo ao Longo do Ciclo da Vida). Pesquisa e Planejamento Economico, Vol. 30, No. 1.

[6] Haig, B. and Anderssen, J., (December 2007), Australian Consumption Expenditure and Real Income: 1900 to 2003/2004. Economic Record, Vol. 83, Issue 263, pp. 416-431. 

[7] Horowitz, A. W., (Feb., 1993), Optimal Patterns of Consumption and Development Expenditures in the Presence of Productivity Thresholds International Economic Review, Vol. 34, No. 1 (Feb., 1993), pp. 193-202.

[8] Paramaiah, (April 2006), Income, Consumption and Savings of the Rural Farm Households: A Study of Coastal Andhra Pradesh. The ICFAI Journal of Agricultural Economics, Vol. 3, No. 2, pp. 52-70, Visaria P,

[9] POPULATION AND DEVELOPMENT REVIEW, 1980 Jun;6(2):189-223.

[10] African Journal of Food Agriculture and Nutritional Development (AJFAND): Volume 5 No 1 2005.