Abstract:
In order to be able to suggest viable solutions to the overwhelming problem of poverty on
the African continent, it is first necessary to know exactly what is causing that poverty. It
is the intention of this paper to measure welfare in Zambia, via an estimated consumption
function, and then to compare this estimated consumption to the levels of poverty, or
subsistence level consumption expenditure, in Zambia. The objective is to understand the
underlying determinants and depth of poverty in Zambia, by analysing the root of the
problem – why people can’t afford to consume. Aggregate real PCE is estimated in
Zambia for the years 1970 to 2001, and it is found that the Zambian economy suffers
from a very high MPC. The results also show that the average Zambian is regarded as
being extremely poor, spending approximately US$17 on consumption per month, as
calculated using the estimated PCE function.
