THE CONSUMPTION FUNCTION - A BASIC NEEDS HYPOTHESIS

This paper proposes to split consumption expenditure on non-durable it ems into 'basic needs' and other expenditure. This is because it is sh own that 'basic needs' consumption expenditure has different character istics, as well as different empirical time series properties. Using b oth seasonally adjusted and unadjusted data, these differences are cle arly demonstrated. For example, it is shown that the two categories of consumption expenditure differ with respect to their seasonal and cyc lical behavior. It is concluded that the distinction advocated should be made on a theoretical as well as empirical level.