Research Article Open Access

Toward a Hierarchical Bayesian Framework for Modelling the Effect of Regional Diversity on Household Expenditure

Pudji Ismartini1, Nur Iriawan1, Setiawan1 and Brodjol Sutijo Supri Ulama1
  • 1 , Indonesia

Abstract

Problem statement: Household expenditure analysis was highly demanding for government in order to formulate its policy. Since household data was viewed as hierarchical structure with household nested in its regional residence which varies inter region, the contextual welfare analysis was needed. This study proposed to develop a hierarchical model for estimating household expenditure in an attempt to measure the effect of regional diversity by taking into account district characteristics and household attributes using a Bayesian approach. Approach: Due to the variation of household expenditure data which was captured by the three parameters of Log-Normal (LN3) distribution, the model was developed based on LN3 distribution. Data used in this study was household expenditure data in Central Java, Indonesia. Since, data were unbalanced and hierarchical models using a classical approach work well for balanced data, thus the estimation process was done by using Bayesian method with MCMC and Gibbs sampling. Results: The hierarchical Bayesian model based on LN3 distribution could be implemented to explain the variation of household expenditure using district characteristics and household attributes. Conclusion: The model shows that districts characteristics which include demographic and economic conditions of districts and the availability of public facilities which are strongly associated with a dimension of human development index, i.e., economic, education and health, do affect to household expenditure through its household attributes."

Journal of Mathematics and Statistics
Volume 8 No. 2, 2012, 283-291

DOI: https://doi.org/10.3844/jmssp.2012.283.291

Submitted On: 4 February 2012 Published On: 25 June 2012

How to Cite: Ismartini, P., Iriawan, N., Setiawan, & Ulama, B. S. S. (2012). Toward a Hierarchical Bayesian Framework for Modelling the Effect of Regional Diversity on Household Expenditure. Journal of Mathematics and Statistics, 8(2), 283-291. https://doi.org/10.3844/jmssp.2012.283.291

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Keywords

  • Household attributes
  • Log-Normal (LN3)
  • hierarchical structure
  • estimating household expenditure
  • reducing poverty
  • development-oriented
  • paradigms associated