Determinants of Household Consumption Expenditure: In The Case of Nekemte Town, Oromia Regional State of Ethiopia

Abstract

The Household consumption expenditure is the monetary value spent by households to purchase different types of commodities (food and non-food items) for their needs within a certain period. The consumption is one of the important economic activities; however, there was not enough researches undertaken on it in the area. The objective of the study was to identify the determinants of household consumption expenditure in Nekemte Administrative Town, Oromia Regional State of Ethiopia. Therefore, the researcher used the cross-sectional data and stratified the town into seven sub-towns. Then, three hundred seventy nine (379) of the households purposively selected by using simple random sampling technique and Kothari 2004 formulae. The study used explanatory research design through multiple linear regression models with Ordinary Linear Regression Method to identify the determinants of household consumption expenditure by using Stata software version 14. The empirical result revealed that the annual disposable income, age, age dependency ratio, family size, and education level of the respondents had positive significant impact, whereas the annual saving and the housing status of the respondents had negative significant impact on annual Household consumption expenditure. On the other hand, the marital status, employment status, and sex composition of the respondents had insignificant influence on household consumption expenditure in the area. The average annual food expenditure was about 53,879.13 birr with the minimum of 8,530 birr to the annual maximum expenditure of 181,814 birr. The average annual food expenditure was about 43,518.47 birr with the minimum of 6,310 birr to the annual maximum expenditure of 222,187 birr. Hence, the government gives attention to improve the households to reduce family size and dependency ratio and to develop saving habits by reducing unnecessary consumption expenditures.