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NOTES AND MEMORANDA INCOME, CONSUMPTION AND SAVING IN URBAN AND RURAL INDIA: A NOTE
Author(s) -
Gupta K. L.
Publication year - 1970
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.1475-4991.1970.tb00763.x
Subject(s) - marginal propensity to consume , consumption (sociology) , section (typography) , economics , permanent income hypothesis , marginal utility , consumption function , sociology , neoclassical economics , microeconomics , macroeconomics , business , life cycle hypothesis , social science , advertising , production (economics) , market liquidity
In a recent issue of the Review of Income and Wealth [1], Uma Datta Roy Choudhury presented some results on consumption and saving functions in India. While the study is interesting, some of the results are quite peculiar. Thus she reports a marginal propensity to save of 0.88 for the urban sector, an abnormally high figure. Other available evidence points to a much lower figure. Again she reports a negative marginal propensity to consume out of permanent income for urban households. This makes no economic sense. Furthermore her attempts at explaining urban consumption behaviour are not very successful. In this paper, we shall show that these suspicious results are the consequences of the measurement and definitions of the variables, and the specification of the functions. Once these shortcomings are removed, we obtain more satisfactory and more plausible results. In the first section we present a critique of Mrs. Roy Choudhury's article. In the second section we present our results. The last section summarizes the conclusions.