Structural Changes of Household Expenditures in Bulgaria – Engel’s Law and Baumol’s “Cost Disease”

This study examines the change in the structure of household expenditures in the light of different income and price elasticity of demand for certain groups of goods and services. The laws of Engel and Baumol were largely followed, according to the former, as wealth is growing the structure of consumption changed, while the latter focus on productivity and relative prices. Econometric techniques have been implemented to correctly determine elasticity coefficients, as well as quantitative methods for expressing the contribution of rising income and prices to household expenditure. The results of the analysis show that income growth is a more significant factor for the change in household expenditure patterns in a developing country like Bulgaria. Considerations have also been made about the effectiveness of monetary policy on the consumption of different groups of goods and services.