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Changes in consumption expenditure patterns in Saudi Arabia, 1970-1985
Abstract
During the last twenty years, Saudi Arabia has undergone fundamental economic and social changes. These changes were fast and sudden and they affected the Saudi households' consumption expenditure behavior. An analysis of changes in consumption behaviors of Saudi households is the purpose of this study. The study is divided into two parts. The first part analyzes the impact of increases in incomes of Saudi households on their consumption expenditure patterns. The study attempts to measure these changes by: (1) estimating the marginal propensities to consume and the expenditure elasticities of demand in metropolitan and non-metropolitan areas of Saudi Arabia in 1970, 1977, 1980, and 1985; and (2) testing Saudi households for structural changes in consumption expenditure patterns for major commodity groups vis, food, clothing, rent, housing, medical services, transportation and communication, entertainment, and "other" items. The second part of the study examines the impact of government transfer programs on Saudi households. By dividing all families into nine income groups, the marginal propensities to consume and the expenditure elasticities of demand are estimated for all household income groups. The results show broad dissimilarity in consumption expenditure patterns between the metropolitan and non-metropolitan households in the 1970s. However, these differences had slightly diminished by mid 1980s, especially for the necessity items. The results confirm the validity of the Engel's Law in Saudi Arabia. As household incomes rose, the percentage of average monthly expenditure (AME) spent on necessities (particularly of food) declined and the percentage of AME spent on non-necessities rose. Finally, by running the behavioral and structural changes tests, the study found that the low and middle-income households imitated the consumption behavior of the high-income households. The low and middle-income households did not notice significant improvements in their real living standards due to government's consumption and income subsidy programs.
Subject Area
Economics|Economic theory
Recommended Citation
Mohaimeed, Ahmed A, "Changes in consumption expenditure patterns in Saudi Arabia, 1970-1985" (1994). ETD collection for University of Nebraska-Lincoln. AAI9430173.
https://digitalcommons.unl.edu/dissertations/AAI9430173