Demographic Impacts on Demand Patterns in the Low-Income Setting

Examines the impact of alternative demographic structures (number and ages of children) on the composition of household demand in order to ascertain the appropriate functional form of such relationships and to identify the most useful demographic specification which captures household structure for use in macroeconomic-demographic simulation models. The Box and Cox transformation is utilized to identify Engel curves using macroeconomic household data from the Kenya Urban Household Budget Survey for the years 1968-69. An analysis of the likelihood function and the expenditure elasticities for 6 budget categories 3 functional forms and 4 demographic specifications is carried out to assess whether this functional form is an improvement and alternative demographic specifications are explored. It is concluded that the Box and Cox model adds little to the simple log-linear formulation and the complex demographic specifications yield relatively little insight. Over sizable ranges of income and family size in low income settings very simple expenditure-allocation models describe empirical reality quite well; households alter their spending and saving less in response to family size and composition than in terms of total resources available.