SHASHIKA RATHNAYAKA, SAROJA SELVANATHAN AND SELVA SELVANATHAN |
Over the last three decades, Asia has undergone a monumental economic transformation, evolving from an economic underdog to a global powerhouse. Our new book, “Economic Development and Consumption Patterns in Asian Countries,” explores the factors driving this unprecedented growth and its impact on consumption behaviours across the region. With Asia contributing over 70 percent of global economic growth, understanding these patterns is crucial for policymakers, businesses, and economists alike.
Key themes
This book analyses consumption patterns in Asian countries that are at different stages of economic development and highlights the similarities and disparities of consumption patterns across countries using a system-wide framework. Using recent data, the book provides a comprehensive econometric analysis of consumption patterns in ten Asian countries: Hong Kong, India, Japan, South Korea, Malaysia, the Philippines, Singapore, Sri Lanka, Taiwan, and Thailand.
In a departure from previous studies in the literature which mainly present only single-country analysis, this book aims to provide a comprehensive analysis of cross-country consumption patterns considering several Asian countries, using the most recent consumption expenditure data for aggregate commodity groups. In comparing consumption patterns across countries, the book uses unit-free measurements such as budget shares and changes in logarithms of price and quantities, thus avoiding problems associated with exchange rate conversions. The book also analyses the dynamic behaviour in the consumption patterns of Asian consumers. The findings of this book will be invaluable to researchers in development economics as well as policymakers in the formulation of fiscal policy or other types of economic control.
Key findings
Are there any empirical regularities in the consumption patterns of consumers from Asian countries?
In terms of income allocation, while food absorbs a significant percentage of consumer budget, it is lower in more affluent countries (Hong Kong, Japan and Singapore) compared to less affluent countries (India, the Philippines and Sri Lanka). Significant variations in the budget shares were also evident across countries. Japanese budget allocation for medical care stood out, being several times higher than most other Asian countries; this could be related to the older population demographic in Japan. Transport budgets varied without any discernible pattern, whereas higher budget shares were spent on recreation and education in higher-income Asian countries. In terms of prices, Japan, Malaysia, and Singapore have the lowest price growth rate and Sri Lanka, South Korea and India have the highest price growth rate for consumer goods. In terms of consumption, food has the lowest annual average consumption growth (1.8 per cent) while transport (5.7 per cent) has the highest. Moreover, Sri Lanka has the highest price growth rate (8.7 percent) and Malaysia has the lowest (2 percent). However, overall consumption growth in the Asian region varies between 2 percent (Japan) and 5.2 percent (Malaysia). On average, prices across countries have increased at a rate of 4.5 percent per annum while consumption has increased at a slightly lower rate of 3.7 percent per annum. Consumption expenditure data for the ten countries supported the four important empirical regularities, including the law of demand and Engel’s Law.
Estimated income elasticities revealed that for a typical ‘Asian’ consumer, food, medical care and housing are necessities while clothing, durables, and transport are luxuries. Demand for all goods is mostly price inelastic. The estimated own-price elasticities were uniformly negative and less than 1 in absolute value. This means that, in general, the demand for all goods for all the countries was found to be price inelastic. The Stigler and Becker (1977) hypothesis that tastes are the same across countries was also tested to answer the question of whether Asian consumers enjoy a significant degree of similarity in their consumption patterns the Asian data do not support Stigler and Becker’s (1977) claim, indicating that, there are more dissimilarities among the consumption patterns of consumers in Asian countries than similarities. This divergence can be attributed to the rich cultural diversity across Asia, economic disparities, demographic variances, geographical influences, market dynamics, historical and political contexts, the impact of globalisation, and technological differences. The intricate interplay of these factors contributes to unique consumption behaviours in each Asian country. Rather than adhering to a one-size-fits-all model of consumer preferences, the study underscores the importance of recognising and understanding the multifaceted influences that shape consumption patterns in a region as culturally and economically diverse as Asia.
Policy implications
- Economic Planning: Policymakers can use these insights to design more effective economic plans and market strategies.
- Business Strategies: Businesses can better target their expansion efforts by understanding consumption patterns and preferences unique to each country.
This comprehensive study underscores the diversity and complexity of consumption patterns across Asia, offering valuable insights for various stakeholders in the region. It not only sheds light on the economic advancements but also provides a framework for analysing and addressing future challenges in the region. By offering a detailed empirical analysis, this book serves as a valuable guide for policymakers, businesses, and researchers aiming to navigate and capitalise on Asia’s thriving economic landscape.
The findings of this study will be important for policymakers in designing their economic plans; it is also important for their counterparts in other countries to determine the market for their exports and for business organisations to implement their expansion targets. One notable discovery from our study is the remarkable surge in consumption growth within the transport and communication commodity group across the region. This shift in spending patterns presents enticing opportunities for businesses and investors not only within Asia but globally. The Asia–Pacific region stands as a hub for technology powerhouses, boasting six of the world’s ten largest mobile phone markets and a substantial, tech-savvy, and youthful population that has embraced social media platforms. This demographic landscape positions the region as a fertile ground for diverse opportunities, encompassing online marketing, advertising, e-commerce, and m-commerce in the dynamic domains of transport and communication. The convergence of a robust technological infrastructure and a growing consumer base highlights the potential for innovative ventures and strategic investments in this thriving sector. Also, we found that the recreation and education groups have the highest consumption growth. From a business perspective, this trend suggests a burgeoning market for leisure and educational services, creating opportunities for entrepreneurs and investors to cater to the growing demand. This may involve the development of recreational facilities, educational institutions, and innovative services that align with changing consumer preferences.
Dr Shashika Rathnayaka, Professor Saroja Selvanathan and Professor Eliyathamby (Selva) Selvanathan are members of the Griffith Asia Institute.
