IMPACT OF HOUSEHOLD INCOME ON FOOD AND NON ALCOHOLIC BEVERAGES CONSUMPTION IN BOSNIA AND HERZEGOVINA  A MICROECONOMIC APPROACH

Article author: 
Lejla Dacić, Hasan Hanić
Year the article was released: 
2019
Edition in this Year: 
1
Article abstract: 

IMPACT OF HOUSEHOLD INCOME ON FOOD AND NONALCOHOLIC BEVERAGES CONSUMPTION IN BOSNIA AND HERZEGOVINA  A MICROECONOMIC APPROACH

Abstract: Th e aim of this paper is to quantify the patterns of consumption of food and non-alcoholic beverages of households in Bosnia and Herzegovina in relation to household income - with a focus on the validity of the fi rst Engel’s Law. Th e problem of household consumption in the last three decades has not been the subject of an analysis of any comprehensive study, both in Bosnia and Herzegovina and ex-Yugoslavia, which points to the relevance of this issue in Bosnia and Herzegovina. Empirical research is based on the econometric modeling of Engel curves using single equation modeling.. Household Budget Surveys in Bosnia and Herzegovina, available for four years (2004, 2007, 2011, 2015), are a key source of data, which are methodologically harmonized with the methodology of the Agency for Statistics of the EU. An analysis of the impact of income on household consumption has been made on the basis of data on income and food expenditure that are given on a monthly basis. Taking into account 6 functional forms and three territorial coverage (FBiH, RS and BiH) for each year of the survey there were 18 regressions estimated. Th e OLS-Ordinary Least Squares method was used to estimate the parameters of the regression equations based on the sample. Of all the functional forms of the Engel curves, which are estimated in the paper, the double logarithmic form best fi ts to food and non-alcoholic beverages consumption and it is distinguished as representative. Th e results of the econometric modelling of Engel’s curves were expected to confi rm the signifi cance of income as a key determinant of consumption, but also provided a deeper insight into the explanatory power that income has in explaining the variation in household expenditure on food and non-alcoholic beverages. Th e information on the intensity of the impact of income on changes in consumption (expenditure) provides income demand elasticities, which are a key parameter in the empirical check of the validity of Engel’s laws. Th e estimated value of the income elasticity is smaller than the unit and in accordance with the fi rst Engel law. Comparison of the estimated parameters of model for diff erent years gives an insight into the time stability of consumer preferences of households. Estimated income elasticities of food and non-alcoholic drinks show volatility in the observed period, which implies a change in consumer preferences. Th e results of this paper can serve as a basis for future extensive econometric research of personal consumption of the population of Bosnia and Herzegovina.

Keywords: consumption of food and non-alcoholic beverages, Engel’s law, single equation modeling, income elasticity

 

Sažetak: Cilj ovog rada je kvantifi kacija obrazaca potrošnje hrane i bezalkoholnih pića domaćinstava u Bosni i Hercegovini u odnosu na dohodak domaćinstva, sa fokusom na ispitivanje validnosti prvog Engelovog zakona o potrošnji. Empirijsko istraživanje zasniva se na ekonometrijskom modeliranju Engelovih krivulja modelom jedne jednačine tražnje. Kao izvor podataka za empirijsku odnosno ekonometrijsku analizu korištene su Ankete o potrošnji domaćinstava u Bosni i Hercegovini, koje su sprovedene 2004, 2007, 2011. i 2015. godine. Intenzitet uticaja dohotka na relativne promjene u potrošnji mjeren je pomoću dohodovnih elasticiteta. Empirijski ocijenjene vrijednosti elasticiteta impliciraju smanjenje učešća izdataka za hranu i bezalkoholna pića sa porastom dohotka domaćinstava, što potvrđuje validnost prvog Engelovov zakona. Poređenjem ocijenjenih elasticiteta za različite godine u kojima je sprovedeno anketiranje otkrivena je značajna volatilnost ovih parametara koja ukazuje na to da je u posmatranom periodu došlo do signifi kantnih promjena u preferencijama domaćinstava Bosne i Hercegovine.

Ključne riječi: potrošnja hrane i bezalkoholnih pića, Engelov zakon, model jedne jednačine tražnje, dohodovni elasticitet