We estimated a system of Engel functions for two survey periods, 1999/2000 and 2004/2005, to quantify the impact of changes of income on household expenditure behavior and to investigate how expenditure responsiveness changes with income.
We found that rural households have a higher expenditure share for food categories but a lower share for non-food categories compared to urban households. The expenditure share did not change so much between the two survey periods, with only a slight decline in the share of cereals-bread and the non-food category and an increase in the meat-fish-dairy category.
All estimates have a good fit, and the total expenditure explanatory variable is significant in all equations. In general, households with lower incomes are more responsive to changes in income for food categories, and less responsive for non-food categories. This is evident with the higher income elasticity of lower-income rural households compared to urban households for food categories. Moreover, elasticities in the 2004/2005 survey period are higher compared to the 1999/2000 period. Per capita real income declined by 37.2% in 2004/2005. This consumption expenditure pattern has an alleviating effect on the impact of a food crisis since a lower real income associated with a food crisis is accompanied by greater responsiveness of households to reduce their demand for food as their real incomes shrink. This adjustment behavior is most obvious in the case of bread and cereals in rural areas, in which the expenditure elasticity increased from 0.50 to 0.91 as per capita income declined.
Fabiosa, Jacinto F. and Soliman, Ibrahim, "Egypt's Household Expenditure Pattern: Does It Alleviate a Food Crisis?" (2008). CARD Working Papers. 502.