Abstract:
Engel’s Food elasticity of demand is one of the indicators of food consumption
behaviour. Identifying food consumption patterns in sectors, this study aims to
estimate Engel's food elasticity of demand among sectors in Sri Lanka. For that
purpose, microdata was gathered from the Household Income and Expenditure
Surveys of 2006/7, 2009/10, 2012 and 2016 with a total of 13,881 households
selected from Badulla, Kandy, Nuwara-Eliya and Ratnapura districts. Households
were chosen from the urban - 2010, rural - 8508 and estate – 3363 sectors. A
quadratic double-log model based on the OLS techniques was applied in the analysis,
while the Wald test was involved to find out that explanatory variables are significant
in a model. Twelve quadratic double log models were estimated and they were
strongly significant. All estimated Engel food elasticity of demands were strongly
significant and less than unity in all three sectors while showing a marginally
decreasing pattern over time. The estate sector demonstrated a relatively higher
Engel food elasticity as food expenditure was more responsive to income changes
than in the other two sectors. Further, the household size, age and education
elasticities were obtained from the model. All the household size elasticities were
positive and strongly significant in all three sectors. Age and education elasticities
indicated negative signs for all three sectors in some periods. The results revealed
that estimated Engel food elasticities were positive and less than unity, so it
conformed with Engel's law. Hence, the government can promote relevant income
opportunities in sectors to increase family income and pay special attention to
designing tax policies on foods.
