POVERTY CONDITIONS and PATTERNS of CONSUMPTION: AN ENGEL FUNCTION ANALYSIS in EAST JAVA and BALI, INDONESIA

Abstract

This paper aims to analyze consumption patterns of various household goods. The data used in this study was sourced from results of household surveys in the East Java and Bali Provinces in Indonesia. The analytical model used to evaluate household consumption patterns was the Engel function. Engel's function model maps the level of consumption to household income. In this study, the explanatory variables used include household expenditure levels, household characteristics and household poverty conditions. The results showed that the consumption of staple foodstuffs was relatively inelastic in terms of an increasing household expenditure. Moreover, the consumption of processed food is relatively more elastic in terms of expenditure. The study also found that poor households have a different consumption pattern in comparison to non-poor households. Poor households allocate less income to basic necessities that are important for health, such as vegetables, meat and fish. The implication is that government assistance for poor households must be accompanied by education on healthy consumption patterns.