Life-Cycle Hypothesis of Savings: Empirical Evidence from Rural Households in Tanzania

Abstract

A number of studies have explored the empirical relevance of the Engel's law by using household budget surveys in developed and developing countries. This article presents an empirical evidence on the applicability of the Engel's law in Tanzania. The analysis is based on a micro-survey data of peasant households in Northern Tanzania. Both statistical and econometric analyses demonstrate that household size and income significantly and positively determine expenditure on food and some other consumption items, depending on the area of the study. The age of the household is established to have no significant influence on expenditure on food, but only on other consumption items investigated. The study has also established that education has no significant influence on any expenditure items of the sampled households.