EMPIRICAL MODEL FOR EAST COAST OF PENINSULAR MALAYSIA HOUSEHOLD EXPENDITURE: Emprical Research'sThe structural equations presented here are in general forms to differentiate between endogenous variables denoted by Yik for i=1, 2,…, p endogeous variable types and k=1, 2,.., m number of endogenous variables used in the model and the exogenous variables denoted by Xlj for l= 1, 2,…, q number of endogenous variables and j=k+1, k+2,…, k+n number of exogenous variable types in the model. the definitions of the variables used in the analyses are also provided to assist readers to refer to the actual variables names as presented in the tables.
The system of the income and expenditure structural equations for identification.
According to the previous studies, most of the researcher like Paulin, Yen and Jensen, Paulin, Newman et. al and Yin et. al used the age, sex, maritial status and education level as the variables to represent individual characteristics. While, for the characteristic of households’ variable, most of the researcher used the households’ numbers and the age level.
The null hypothesis of this study assumes that there is no significant association between expenditure and income while the alternative hypotesis states that there is a direct association between income and expenditure. Theoretically for a normal goods when income increases there is a strong tendency for the expenditure to increase accordingly. Similarly to variables of age, maritial status, sex, high education level and the numbers household.
Nevertheless, the relation between age and expenditure are expected to be explained by a quadratic function whereby at the earlier stage in life expenditure will gradually rise to a maximum level consistent with the productive age of the wage earner. After this maximum expenditure there is a tendency for expenditure to decline showing a negative correlation with the expenditure. It is hypothesized that as people get older they spend less on consumer goods and on foods outside the house and probably prefer to have food prepared at home. This hypothesis is parallel to the emprical research’s finding of Wagner and Yin et. al. While for the dummy variable on location it is generally expected that the urban respondents expenditure is usually higher than the rural respondents because of the high cost of living in uraban compared to the rural area.