Function for Handloom Textiles in Calcutta

Gupta (1996) estimated a demand function for handloom textile in Calcutta in the year -
based on cross-sectional data from households obtained through two stage systematic
random sampling method. On theoretical plane, the following model pf demand function
for handloom was formulated:

log PCEH = b0 + b1 PHC + b2 PMC + b3 FI + b4 IG + b5 TI + b6 EDU

+ b7 OC + b8 MT

Where
PCEH = Per Capita Household Expenditure on Handloom
PHC = Price per Meter of handloom cloth
PMC = Price per meter of mill cloth
FI = Family Income
IG = Income group of household (whether low income, middle income or high
income)
TI = Total individuals in the household
EDU = level of education of the House holder(whether low income, middle income or
high income)
OC = Occupation of the householder
MT = Mother tongue of the householder

Price and family income and the number of individuals in a household are quantitative
variables, other variables are qualitative. The effect of qualitative variables is taken into
consideration by dummy variables.
A prior expected sign of the PHC variable is positive while that in case of PMC should be
negative. Positive signs are also expected in case of family income and econamic group.
Negative sign is expected in case of TI.
The log linear model was fitted to the data of handlooms buyers through the step write
method with household per capita expenditure om handloom is positively related with
price of Handloom (PHC). University Education of head of household(EDU) and
affluence of household (IGH) and negatively related to total number of members in the
household(TI)

Log PHEC = 1.6926 + 0.0216 PHC + 0.1366EDU + 0.2877 IGH - 0.0982 TI

T value (20.242) (13.494) (2.460) (3.824) (-5.635)

R2 = 0.6264

Interpretation

The above stated demand function can be interpreted as follows:

Other things being given, a one rupee increase in the handloom cloth price leads to 2046
percent rise in the per capita expenditure on handloom. With every unit rise in household
size the per capita income expenditure fall by 9.82 percent. The price is, however, the
least important variable in deciding the per head amount of expenditure on handloom, the
average price of handloom cloth has the smallest coefficient. On the other hand, the
affluence of the household is the most important variable in deciding per capita
expenditure, thus, demand for handloom followed by the university education of the
head of household.
This suggests that non-price factors are more important than the price in determining the
demand for handloom textiles in Calcutta. Handloom is more in demand with the
improved economic status (higher income level?) among the residents in the city.
Weavers should, therefore, be encouraged to cater to the needs of the wealthier section
and highly educated people in the city.
Thus, the Bengal Handloom industry for its betterment should shift its focus and expand
the market in this segment (i.e. educate high income group of buyers), catering to their
special needs and choice. With this kind of approach it can hope to survive and counter
and attacks from the mill sector in textile markets. This will also help in improving the
earning and welfare of the weaver clan in the city.
 Assignment No 2

Demand Estimation
(Handloom Textile in )