This paper analyses expenditure patterns of low-income households in Malaysia with special emphasis on the difference between prior year of the 1997 financial crisis and crisis year. The study used a method based on Engle"s law, which appears to yield more plausible results. The result of the study showed that the expenditure patterns in Malaysia varied between prior crisis year and crisis year. For all households, there have been substantial increases in the share of the budget spent on food suggesting a decline in welfare. Expenditure elasticity for food products in crisis year was lower than for the corresponding prior crisis year elasticity. It means that food became more necessary goods in crisis year. On the other hand, there was a quite drastic difference between non-food elasticity estimates for prior crisis year and crisis year. Expenditure elasticity for non-food goods in crisis year was higher than for the corresponding prior crisis year elasticity. It indicates that non-food items became more luxurious in crisis year. The differences in expenditure patterns between prior crisis year and crisis year among low-income households imply that development of aggregate consumption patterns in Malaysia will be affected by aggregate expenditure reduction due to any economic shocks.
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