This is not the first time Engel’s Law has been written about here. And unlikely the last time. The 2016 Household Income and Expenditure Survey report is out and we’ve started poking around for insights. Here is a sample: From a high of 60.9% of total household expenditures spent on food in 1990-91, the food ratio has declined to 34.
In the course of preparing for a talk, I was entering household expenditure data on communication-related activities into a spreadsheet that contained data from the 2009-10 Household Income and Expenditure Survey (HIES). In the three years since 2009-10 many things have happened to expenditure patterns, but one thing jumped out. In 2009-10 a household reported an average expenditure of LKR 382.72 outside the home per month. In 2012-13, this had declined to LKR 17.
Earlier today, I was asked by a TV channel to comment on the most recent (2015 H1) computer literacy and related indicators issued by the Department of Census and Statistics. I summarize below my comments. The survey, based on a sample of 12,500 households with persons aged 5-69 years, reported that computer literacy for the country was 26.8 percent. Under the previous administration, computer literacy was a fraught indicator.
The 2009-10 Household Income and Expenditure Survey (HIES) is a representative sample survey based on responses from 22,000 households from all across Sri Lanka, except Kilinochchi, Mullaitivu and Mannar districts that were considered too dangerous because of uncleared mines. It is a veritable treasure trove of data on how Sri Lankans live, what the differences among the provinces are, and, when combined with data from past HIES, a source of trend data. It reports communication and recreation expenditures separately, but I decided to combine them since communication is recreation. When the different telecom related expenditures are combined, they amount to LKR 750 per month (around USD 7) and dwarf everything else. Households spend 17 times more money on telecom and Internet services than on books, newspapers and magazines.
A research article that will shortly be published in Information Technology and International Development got me thinking about Engel’s Law, which states that as income rises, the proportion of income spent on food falls, even if actual expenditure on food rises. The article is by Aileen Aguero, Harsha de Silva and Juhee Kang. It’s not about food prices, per se, but about some extensions that allow the identification of necessary goods and luxuries. Their interesting finding is that voice telephony is a necessity in Asia (in the six countries covered by LIRNEasia’s teleuse@BOP research), while it is still a luxury in Latin America. How could the same thing be a luxury in one place and a necessity in another?