Analysis Of Determining Factors Of Household Consumption In Mali

Consumption is the hub of economic life. At first it’s the starting point,it is only after consumption that there can be funds for production processes; in other words it’s the final destination of the production. The purpose of production is consumption; without consumption, production loses its meaning.Considering the importance of consumption in economic activity of a country, we think it’s necessary to know the factors that influence consumption in a poor country like Mali,where consumption represents more than 78% of GDP.Using household survey data from National Statistics Office of Mali for the years1989 and 2006 in addition to Data from(World Bank and National Statistics Office of Mali)1990 to 2012,we analyze the determining factors of consumption. In our analysis,we consider variables like household final consumption,disposable income,general levels of prices and unemployment rate in our econometric model to determine the effect of each of the variables on consumption. The paper also provides some theories of consumption to guide the discussion.We conducted the following analyzes:1. In order to give more credibility to our research,we introduced some theories about determinants affecting consumption. Firstly,we introduced the classical theory of consumption and then introduced new developments in consumption theory.2. In order to analyze the structure of household consumption in Mali,we analyzed the evolution of the total consumption expenditure at national level;evolution of total consumption expenditure according to residence area; evolution of total consumption expenditure of main cities and evolution of total consumption expenditure of socioeconomic groups.3. In order to achieve our goals and to test hypothesis we used E-views, econometric software and estimated an Error Correction Model. We analyze in long-term and short-term the effects of household disposable income,general price level and unemployment rate on household consumption in Mali.Finally,we came to the conclusion consistent with the theory that the main factor affecting consumption is income.In the present study,in the long term,household disposable income has the greatest impact on household final consumption; and the impact of prices on consumption is negative. In the short term,only household disposable income has influence on consumption. So the government can use income increasing policy to maintain household consumption growth.