Sensitivity of Consumption to Current Income in Developıng Countries: An Empirical Reinvestigation of Absolute Income Hypothesis

Authors : İpek TEKİN

Pages : 48-62

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Publication Date : 2018-04-15

Article Type : Research Paper

Abstract :The main purpose of this study is to estimate the Keynesian Absolute Income Hypothesis using panel data from developing countries classified by income groups and regions. In accordance with this purpose, fixed and random effects are used as estimators. The results suggest that current income level is a significant determinant of current consumption expenditures which means that Keynesian consumption function is still valid for developing countries. Besides, marginal and average propensities to consume are smaller than 1 as expected and decreasing from low towards upper-middle income countries. Regionally, the highest marginal and average propensities to consume are estimated for Africa region as expected.
Keywords : Developing Countries, Keynes, Absolute İncome, Marginal Propensity To Consume, Panel Data