In this study, household consumption function is estimated over the distinction of rural / urban settlements in Turkey. The database of this study is obtained from Turkey Statistical Institute (TURKSTAT)s "Household Budget Survey" survey for the years 2004-2013. Generalized Linear Model (GLM) is used due to the skewness in the income and expenditure series. This study, carried out fundamental differences from previous studies are as follows: application of GLM in the estimation of consumption function in Turkey; and testing the theoretical consistency of the socio-psychological based propensities of the consumption pattern, through the rural-urban differentiation. Income elasticity by total coefficients in urban areas estimated 0.73, according to the permanent income hypothesis and 0.86 according to the life cycle hypothesis. Ignoring the wealth effect in models leads to an inefficient result. Therefore, alternative model comparisons with GLM reveal that more appropriate results have been obtained from the life cycle hypothesis.
Key words: Keywords: Consumption function, Life Cycle Hypothesis, Permanent Income Hypothesis, Generalized Linear Model, Rural-Urban. Jel Codes: D11, D12, D31. Article Language: EnglishTurkish
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