The implication of expenditure elasticities on imports of Consumer products in Kenya

Abstract

The paper is concerned in estimating expenditure elasticities, making demand projections and bringing out the implications on imports of several consumer products mainly foodstuffs. Kenya has been importing a large proportion of its consumer products particularly foodstuffs and as revealed by this study the growth rate in demand for such products is quite high. Consequently, the implied growth in demand is even higher than the domestic production growth rate. in most cases. This should send danger signals to the Government and the relevant ministries and departments especially the ministry of agriculture and livestock development. It is evident from the result that, while different factors affect demand for different commodities differently, income, household size and education are the most important ones. The results reveal that, one of the country's Major objectives of achieving self-sufficiency in food supply and security has already been challenged and might continue to be challenged in the future. Considering that Kenya like other developing countries experience shortage of foreign exchange the depth of the problem is great. The study reveal ''to several interesting but surprising results. first several foodstuffs emerged as luxuries . .. Theoretically, food is classified under the category of necessities but the results of this study <. prove otherwise for several food commodities. The conditions leading to these results are explained in the text. The other interesting result is that, different forms of cereals like maize grain and maize flour appear as "substitutes" with respect to household size changes. The other rather surprising result is that all the imported commodities studied emerged as luxuries save for rice but its expenditure elasticity was also high. Most of the studies results are close to those .of other studies and some of the projections are close to those obtained by Government in the sessional paper number one of 1986 on Economic Management for renewed growth. It is evident that unless the production growth v rates of several products especially food crops is accelerated the country will not be able to feed its rapidly increasing population in the future. Moreover, several measures need to be executed with respect to policies concerning population growth as well as production generally.