Income elasticities of household demand in rural China: Estimates from cross‐sectional survey data

Calculates income elasticities of demand for ten commodity groups and 30 rural regions in China by fitting Engel functions to a set of household expenditure survey data. Finds that staple food, clothing and fuel are necessities, while housing, service, eating out, entertainment and culture, and non‐staple food are luxuries. Discovers substantial variations in the elasticities across regions. Introduces Kmenta’s model to take advantage of the cross‐sectional nature of the data, showing it to dominate the conventional approach.