In general, varies widely with the lowest being 0.3 and the highest 0.9. The lowest range is still acceptable because the study uses the cross-sectional data. Based on the result of 2SLS analysis, there are 8 simultaneous equation systems estimated for the state of Pahang.
Most of t-values for Equation 1 in Pahang are significant at 0.01 and 0.05 probability levels. There is positive relationship between INC (income) and EXTO (total expenditure) whereby the EXTO is used as an endogenous variable. As noted a one percent (1%) increase in income necessitates an increase of 0.21 percent in the total of expenditure (refer to Equation 1). This scenario is consistent with the Engel Theory, whereby an increase in income would generate a less then unity on food and as income further increases lesser proportion of income will be spent on food items. For rural community of the East Coast which include Pahang a large proportion of their income and expenditure is mostly allocated for food (see Equation 2). This positive relationship between income and total expenditure is expected and is in constant with the microeconomic theory. This means that as household income level rises it influences the spending behavior of the households. On the other hand, an increase in EXTO will have an impact on the household income the magnitude of which is 0.71 and is highly significant at 0.01 probability level. This implies if total expenditure were to increase by 1 percent the household will have to increase higher, that is by 0.71 percent (refer to Equation 2). In order to spend more the household will have to work extra time to obtain much higher income.
While, for the variables such as HLO (housing loan) and ALO (automobile loan), there are found to be highly correlated with EXTO (total expenditure) at 0.01 level of significant or 99.0 % (probability level). The reason for strong association between housing loan and automobile loan is obvious as these are the major investment expenditures of high priority for the majority of people. Most of them would like to spend more money to fulfill their family and individual needs by making loan for life long investment asset such as housing and automobile from financial institution. Total borrowing loan (TBL) equation indicates that these variables; housing, automobile and education are statistically significant. Moreover, if they have the means to pay installments on these two assets it would not be difficult to get loans from the banks.
Next, with reference to Equation 2 expenditure on food (EXF) is found to show high association with the total expenditure (EXTO) and family size (FSA) at 0.01 probability level. In all cases the associations are positives implying that an increase in total expenditure will increase spending on food, and number of family members will directly influence expenditure on food. Besides, on a lesser degree age can be another variable that could increase expenditure on food.