Munich Personal RePEc Archive

Income and Household Consumption Expenditure in Nigeria

Onanuga, Abayomi and Oshinloye, Michael and Onanuga, Olaronke (2015): Income and Household Consumption Expenditure in Nigeria. Published in: Ago-Iwoye Journal of Social and Behavioral Science , Vol. 4, No. 2 (31 July 2015): pp. 123-139.

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Abstract

The study estimates consumption function for Nigeria applying strictly “Absolute Income” hypothesis as introduced by Keynes. Formulating a model that specifies real consumption as a stable function of real income we applied Granger representation theorem so as to identify short and long run relationship. And our data set being the Gross domestic product by type of expenditure (proxy of income) and household consumption expenditure (both at constant 2005 prices - naira) for the period 1970-2011. The marginal propensity to consume MPC is ~0.64 and Nigeria’s autonomous consumption is estimated to be 1.93 trillion naira. Since Keynes emphasizes short run consumption function, the short run MPC (0.78) is less than APC (0.88), which makes it non-proportional, this complies with Keynes theoretical position but defies the long run consumption function of being proportional to APC as 0.64 is not equal to 0.88.

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