Abstract:
The study aims to identify households' income and expenditure behavior based on
selected theories in Sri Lanka. The sample was selected from households in five
districts in the Northern province such as Jaffna, Mannar, Mullaitivu, Kilinochchi and
Vavuniya. By using a systematic sampling method, 930 households were identified
and a self-administrated questionnaire was issued to collect data. Finally, 909 usable
questionnaires were considered, and then data were analysed with a non-parametric
analysis. The results reveal that majority (79.7%) of the household income is less than
Rs.100,000 and 62.6% of the income used for consumption purposes. The majority
of the respondents accepted that their consumption behaviour was changed during the
post war era. According to the chi-square test, the relative income hypothesis was
rejected and the permanent income hypothesis was accepted. Simultaneously, the
application of the hyperbolic discounting model is more suitable for low- and middle income people. Therefore, the study concludes that households' expenditure behavior
in Sri Lankan is connected with their level of income.
