Determinants of consumption expenditure: an investigation of Friedman’s hypothesis in Bayelsa State, Nigeria

Abstract

This study evaluated the extent to which household permanent income determine the consumption expenditure of households in the different income groups in Bayelsa State under the framework of Friedman’s permanent income hypothesis. A questionnaire was applied as the tool for collecting primary data for the study. Data from the questionnaires were analyzed using the Quantile regression technique. Findings showed that household investment as a component of permanent income is a negative function of household consumption expenditure. While pension funds return as a component of household permanent income was seen to be a positive function of consumption expenditure. Meaning that an increase in pension funds returns would yield a positive but insignificant increase in consumption expenditure for the households in all income groups in the Bayelsa State. The study conclude that permanent income does not significantly determine the consumption expenditure of the households in the different income groups in Bayelsa State. It is however recommended that Bayelsan, especially those who are actively employed be properly enlightened to invest their funds in pension scheme by the State government and other NGOs.