Rural-Urban Differences in Consumption Patterns: An Application of QUAIDS

Zahid Iqbal and Sofia Anwar

Abstract

The main focus of this study is to estimate the rural-urban income and own price elasticities across a range of consumption quintiles. The analysis 
revolves around computation of expenditure/income and price elasticities 
(own price and cross price) including the compensated and uncompensated elasticities of food items using HIES data (2010-2011). The Quadratic Almost Ideal Demand system is used to estimate the parameters of the food commodity groups and estimation was done by SUR technique. The results of the study showed that the poorest families in Pakistan are the most vulnerable section of the society as their expenditures are greater on food items as compared to the expenditures of richest households taken into analysis. Expenditure elasticity of fruits was found to be highest in both rural and urban sectors and this is reasoned by the current economic scenario in the country where higher tax rates, consumer preferences and low salaries determine what people prefer in food consumption to a greater extent. Lack of dietary diversion is one major reason for such unique consumption patterns across rural-urban households in the country, thus, suggesting that policies inclined towards income will play an important role to achieve the goal of balanced diet prevalence in Pakistan.