Fitting of Engel curve for

Urban Maharashtra
What is an Engel curve?
Engel’s Law
“The Proportion of income spent on food decreases as the income
increases, other factors remaining constant”
Engel Curves
• Normal goods
• Inferior goods
Data Extraction phase I
• Raw data from 63rd round of NSS in the form of
fixed-width Text Files
• Identify data file corresponding to Maharashtra
• Convert data to delimited files using Java
programming
• Data layout defined as per NSS 63 support
• Import delimited data into excel workbook
• Remove redundant, blank and unused heads
 Raw Data

Structured Data
Data Extraction phase II
• Filter Data for Urban Sector – Sector 2
• Split Data into 2 sub samples – SS1 & SS2
• Generate Unique Keys for all households
• Determine Food & Total Expenditure for all
households
• Determine control variables such as gender
ratio, HH Size, & seasonality from Levels 2 & 3
What Methodology is followed?
• Stratification considered for the study
▫ Two subsamples are used
▫ Appended for consistency check
• Mathematical technique for analyzing the data
▫ Multivariate Regression models
• The Primary Variables considered
▫ Y Per capita food expenditure as a proxy for food consumption
▫ X Per capita total expenditure as a proxy for income
• The Control variables considered
▫ Seasonality
▫ Household Size
▫ Female to male Ratio
Multivariate Regression models
Linear Regression Model
Y= β0 + β1X1+ β2X2…..+ βn Xn
Semi Log Model
Y= β0 + β1 ln X1+ β2 ln X2…..+ βn ln Xn
Double Log model
ln (Y) =ln (β0) + β1 (ln X1) + β2 (ln X2)…+ βn (ln Xn )
Model Income Elasticity
Linear Regression Model  
Ƞ= β1*X1
Y
Double Log Regression Model
Ƞ=β1
Linear Log Regression Model Ƞ=β1
Y
 
Leser –Working Form Ƞ= β1*X1 +1
Y
Estimated vs. Observed Graphs
1 2

1. Linear
2. Semi-Log
3. Double Log
Results & Analysis

Goodness of Fit for Functional Forms

Best Fit-Double Log form
Conclusion
• Double Log form has the best regression fit
• Income elasticity of food consumption < 1 for all
functional forms
• Income elasticity is consistent across sub-
samples
• Households with greater Female: Male ratio
tend to have higher food expenditure