Structural relations among the components of household income and expenditure in Kohima, Nagaland

Ngullie, ML and Mishra, SK (2008): Structural relations among the components of household income and expenditure in Kohima, Nagaland.

Abstract

This paper presents our findings on the structural relationship between household income and consumption expenditure in the township of Kohima. It is based on the primary data collected from 209 households inhabiting 19 wards of the township. It is found that about 56 percent of households are in the per capita monthly income class below Rs. 4000. About 61 percent of the household income is drawn from salaries and pension while about 22 percent of the same is drawn from self-employment. About one third of the income is spent on food items and about one fifth of the income is spent on clothes, shoes and housing-related items. About 11 percent of income is spent on education. The average propensity to consume is about 63 percent of income. The marginal propensity to consume is about 0.55. Per capita income explains about 85 percent of variance in per capita consumption expenditure. Distribution of income and expenditure over the households is mildly unequal as the Gini coefficients for them are 0.367 and 0.312 respectively.

On the basis of income elasticity of consumption expenditure on different items it has been found that rented house is an inferior good. Most of the food items, clothing, fuel, electricity, toiletries and education are normal necessity goods. Addictive items, medicine, newspaper, telephone, cable TV, travel, etc. fall in the superior goods category. Attending to social obligations is a strongly superior item of expenditure. Increase in family size affects consumption of superior goods adversely. Family size and income are positively correlated.

To investigate into how the different components of per capita income (salaries, pension, wages, etc.) relate to the different components of consumption expenditure (on food grains, vegetables, etc.), not severely but jointly, we have gone in for the canonical correlation analysis. This analysis between income components and expenditure components indicates that income obtained from secure and stable streams such as salaries, pension, rentals and self-employment supports expenditure on necessities such as food items, housing, clothing, etc. A community-wise distribution of income and expenditure reveals that while Angami, Ao and Lotha communities among the Naga tribes are relatively better off, households belonging to other Naga communities and those migrated from other parts of the country are relatively worse off. Several factors obtained from canonical correlation analysis are strongly significant and point to much more complicated structure and divergent determinants of relationship between the components of income and consumption expenditure.

We have also gone in for discriminant analysis to investigate if increase in per capita income of the households brings about structural changes in the pattern of consumption expenditure. Our findings suggest that indeed it is so and such structural changes are statistically significant.

• Item Type: MPRA Paper
• Language: English
• Keywords: Household Income; expenditure; marginal propensity to consume; Lorenz curve; Engel’s elasticity; Gini coefficient; Robust regression; Least Median Squares; canonical correlation; discriminant analysis; Nagaland; Kohima; India
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis

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