CONTENTS

INTRODUCTION…………………………………………………………………………………….3

SECTION 1 Individual demand for Private good……………………………………………………………...4

SECTION 2

Engel Model OLS Estimtion………………………….………………………………………….6

Empirical Results explanation………………....………………………………………………….8

Analysis of Scale Economies across Different Income Groups……..………………………..…10

SECTION 3

Economies of Scale and Poverty Measure……………………………………………………….12

Economies of Scale and Welfare Comparison…………………….…………………………….13

Implication of Economies of Scale to the Government Welfare Policy..……………………….14

CONCLUSION………………………………………………………………………………………17

REFERENCE….…………………………………….………………………………………………18

APPENDIXES Appendix1. Explanation of Variables…………………………………………………………21 Appendix2. Estimated Results of Engel Curve……………………………………….……….22 Appendix3. Estimated Results of Engel curve without control variables for performing F-Test……….…………………………………22
Appendix4. Estimated Results of Engel Curve for 5 Income Groups…………………………23
Appendix5. OECD Equivalence Scale………………………………………………………...26

INTRODUCTION

The paper discusses household resources allocation between jointly consumed goods (public goods) and those consumed individually (private goods); and implication of household scale economies to the government welfare policy. The first section focuses on the derivation of the individual demand function for private good, and the effect of change in household size on private good consumption. The second section provides OLS estimation of the Engel curve borrowed from Deaton and Paxson (1998) for clothing (purely private good). For the purpose of estimation and analysis the sample data of 2948 Uzbek households from World Bank’s Living Standards Measurement Survey was used. In addition, the sample was divided into 5 income quartiles and the variation in household economies of