Consumption and saving of the middle class in Malaysia

This paper explores the behavior of consumption and saving of the middle class households in Malaysia.The analysis is based on the data sets contained in the three reports of the Household Expenditure Survey (HES): HES 1998/1999, HES 2004/2005, and HES 2009/2010. Using the detailed household expenditure data, the consumption data are derived by subtracting the expenditures on nondurable goods, education, health, insurance and mortgages.Using the household income data, the household saving data are residually derived. By defining the middle class as the group of households whose income falls within the 25% of the median household income, we find that each of the lower, middle, and upper classes constitutes, respectively, about 35%, 25%, and 38% of all households in the sample.When the pattern of consumption and saving of all income classes is examined, we find that the consumption share of income is regressive while the saving share of income is progressive.When consumption is broken down into several sub-categories, we obtain the following main results.First, four categories occupy the high rankings for all income classes: food and non-alcoholic beverages, housing and utility, restaurants and hotels, and transportation. Second, the relative rankings of these four categories differ between the upper class and other income classes.Third, the consumption share of income is regressive for food and non-alcoholic beverages, housing and utility, and restaurants and hotels