Consumption Pattern Determinants of Low-income Household: Evidence from Malaysia

Abstract

This research aims at analysing the determinants of low-income household consumption patterns which represent the lowest income category at the bottom 40 percent (B40) of the population's income level. The determinants were socioeconomic and demographic factors. We used the OLS and Tobit estimation methods to determine the effects of these factors on B40 household consumption pattern. The findings showed that income, urbanisation, household size, gender, marital status, elderly status, housing status and age influenced the B40 household consumption. We thus conclude that socioeconomic and demographic factors exert significant impact on the B40 household consumption patterns. As urbanisation and development are rapidly growing, the study discovered that urbanization has a significant effect on food, transportation, clothing, equipment, alcohol and tobacco consumption patterns of B40 household. The study also showed differences in consumption pattern of the elderly compared to non-elderly B40 members. Further, the elderly status produced significant impact on food, housing, health, education, clothing, communication, and equipment. In addition, there are considerable differences between the 12 group of household consumption patterns based on age, gender, marital status, income, housing status and elderly. Changes in and evolution of socioeconomic and demographic factors also exert great influence on B40 household consumption and should thus be prominent in government policy. This study suggests that the government should focus on these factors in order to sustain B40 households’ consumption level when real incomes are decreasing while the cost of living is intensifying. The government should also pay attention to the influence of socioeconomic and demographic factors that play a significant role in B40 household consumption and in structural changes to identify the vulnerable groups of households in order to gauge their diminishing ability to sustain spending.