Analysis of Household Expenditure in Rural Areas of Ondo State, Nigeria: Using Quadratic Almost Ideal Demand System

Abstract

Poverty level in Ondo State is extremely high particularly in rural areas, this is due to low per capita income coupled with various factors and the consumer price index increasing on a daily basis such a way that household income can hardly cope with the trend. Consequently, there are several empirical studies on household expenditure but most of those studies focused on only foodstuffs, however, this study focused on food and non-foodstuffs. This study investigated households’ expenditure in rural areas of Ondo State and the specific objectives were: (i) examined the effects of income on household expenditure in rural areas of Ondo State and (ii) identified the determinants of household expenditure in rural areas of Ondo State. Data collected from five hundred and nineteen (519) households’ heads selected for the study through multi-stage sampling method were analyzed using the QUAIDS. The study found that all expenditure elasticities were positive, indicating that food and non-food items are normal goods. It was also discovered that Beans (0.22) and Gari (0.82) are necessities with their elasticities less than 1 while others are luxury goods since their elasticities are greater than 1. Own price elasticities were mostly negative as expected in both uncompensated and compensated price elasticity estimates for food items. The Hicksian cross-price elasticities showed that gari and meat were substitutes. The study concluded that income and price  influence household purchasing power in rural areas. And thus recommended that economic policies should be geared towards preventing fluctuations majorly in the price of food and non-food items.

Keywords: Luxury, QUAIDS, Elasticity, Expenditure, Food Demand and Household