ETIQUETAS: Peru, telecommunications expenditure, households, household expenditures, Engel curve
This study evaluates the importance of telecommunications expenditure as a share of total household expenditures, including calculation of income elasticity and the likelihood that households will have telecommunications expenditures, when a limited supply of services is not a factor. This analysis involves examining evidence of the applicability of Engel’s Law, comparing to food expenditure, and an estimate of the Engel curve, relating total expenditures to the share of telecommunications expenditure. For the three years studied (2003, 2004 and 2005), telecommunications have the characteristics of a luxury good, as expenditure on these services as a share of total expenditures increases in higher deciles of total household expenditure. The evidence supporting the fact that telecommunications are a luxury good is complemented by the results of the Engel curve for 2004, where parameters show an income elasticity of 1.97. These findings must be interpreted carefully, because telecommunications cannot be treated like other luxury goods, whose consumption is taxed. Given the potential and importance of telecommunications, measures implemented in this field must help make this service more affordable to all households.