Bottom of the Pyramid Expenditure Patterns on Mobile Phone Services in Selected Emerging Asian Countries

Author

Aileen Agüero, Research Intern, LIRNEasia, Sri Lanka

Co-Author

Harsha de Silva, Lead Economist, LIRNEasia, Sri Lanka

Abstract

This paper evaluates the importance that mobile telephony expenditure has in consumer budgets of the Bottom of the Pyramid (BOP) of selected emerging South-Asian countries, including the estimation of income elasticities. It is examined if this service shows, according to economic theory, the characteristics of a luxury good or a necessity, which implies assessing if expenditure in mobile telephony as a share of total personal income increases or decreases when approaching higher income categories. The latter pattern is found, which indicates that mobile telephony is a necessity.

Poverty issues are addressed with the estimation of Engel curves, as they show how consumption of different goods and services change with variations in the consumer’s income. This provides an idea of income elasticities, or consumer responses to changes in income. Therefore, for more in-depth analysis of mobile telephony expenditures in Bangladesh, Pakistan, India, Sri Lanka, Philippines and Thailand, Engel curves are also estimated. This analysis is based on previous work for Latin-America.

A study of this nature is highly relevant as it clearly shows that mobile phones are part of everyday lives and that they are undoubtedly a necessity in nowadays society among the low-income consumer groups in the selected countries of South-Asia.