Econometric Analysis for Food Consumption ExpenditureFunctions in the Kingdom of Saudi Arabia

Abstract

The goal of this study is to estimate expenditure elasticity for food, fruits and dates. The estimated elasticity will be used in investigating the effect of income changes on the expenditure of food items. The Study relied on Cross Sectional data obtained from random sample representing consumers from various regions of the Kingdom (550 consumers). Multivariate Analysis was utilized to specify and estimate the expenditure functions within the framework of system of equations analysis. The results of the study showed a positive food expenditure elasticity, Fruit expenditure elasticity and date expenditure elasticity in all regions under investigation. Food expenditure elasticities for middle and western regions are higher than in eastern region. The expenditure on fruits in the middle region is higher than in eastern and western regions. The elasticity of expenditure on dates is also higher than in eastern and in western regions. In both middle and western regions, the elasticity of expenditure goes lower when going from expending on food, to expending on fruits to expending on dates. This means that dates are considered more necessary food commodities than other fruits. It is concluded that the marginal propensity to expend on food, and dates, so their expenditure elasticities of those categories is lower for Saudies than for non - Saudies, while the marginal propensity to expend on other fruits, so fruit expenditure elasticity is higher for Saudies compared with non- Saudies. It seems that dates are more necessary food item than other fruits for Saudies, while fruits are more necessary than dates for non- Saudies