Estimates of consumer demand parameters for Ethiopia

Course ID
Ethiopian Economics Association (EEA)
Kassu Wamisho

Future growth within Ethiopia’s agriculture sector will most likely depend on how well the country can tap into domestic and regional market opportunities for staples and livestock products. This paper examines the potential future and existing demand patterns for basic food staples by rural and urban households in domestic market of Ethiopia. The paper employed separate Engle demand equation for each individual commodity and the estimation model follows the Ratio Semi-log Inverse function in the two national Household Income Consumption and Expenditure Surveys conducted in 1995/96 and 1999/2000 respectively. The paper finds that, on average consumption expenditure of cereal accounted for about one-third of the total spending of the poorest quintiles of the household, and over all food consumption shares is around 56 percent. Per capita total annual consumption expenditure at national level dropped considerably in 1999/2000 compared to 1995/96. Marginal propensity to Consume(MPC) rises for most of agricultural products by rural than urban households and expenditure elastisity of most of staple food items is close to one for rural and less than for urban households in both survey years. In Ethiopia, the value of MPC is significantly smaller than average budget share for the coarse grains but the reverse is true for livestock products.Both budget share and absolute spending analyses seem to suggest that domestic demand for staples in Ethiopia will have to increase rapidly if growth is to be pro-poor. Rapid growth is needed given the huge consumption gaps of staple foods between the rich and the poor

Corporate Author: Getnet Alemu and Edilegnaw Wale (Editor) & Ethiopian Economic Association/Ethiopian Economic Policy Research Institute
Publisher: Ethiopian Economic Association (EEA)
ISBN/ISSN: 978-99944-54-05-1
Primary Descriptors: Marginal propensity to consume

Secondary Descriptor: Average budget share

Geographic Descriptors: Ethiopia
Cataloge Date: 02/27/2013
Broad Subject heading: Expenditure elasticity
Call Number: 330.963 PRO 2009
Serial Key Title: Proceedings of the Fifth International Conference on the Ethiopian Economy
Publication catagory: International Conference
Content type: EEA Publication
Volume: I
Publication date: 2013-12-27 23:09:00
Forum or Discussion date: 2013-02-27 15:02:12
Place of publication: Addis Ababa, Ethiopia
Type of material: Book
Current frequency: Annualy
Author: Kassu Wamisho and Yu, Bingxin