The Consumption Response to Income Fluctuations in Egypt: Evidence from Public Sector Wages and Subsidy Reforms

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Published: Dec 9, 2025
DOI: https://doi.org/10.64753/jcasc.v10i4.3074
Keywords:
Consumption Smoothing, Egypt, Public Wages, Subsidy Reforms, Liquidity Constraints, Informal Sector, Policy Evaluation

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Gaber Sallam Salem
Department of Insurance and Risk Management, College of Business, Imam Mohammad Ibn Saud Islamic University (IMSIU), Riyadh 11432, Saudi Arabia;
M. M. Abd El-Raouf
Institute of Basic and Applied Science, College of Engineering and Technology, Arab Academy for Science, Technology and Maritime Transport, P.O. Box 1029, Abu Quir Campus, Alexandria, Egypt
M. A. El-Qurashi
Institute of Basic and Applied Science, College of Engineering and Technology, Arab Academy for Science, Technology and Maritime Transport, P.O. Box 1029, Abu Quir Campus, Alexandria, Egypt
Abdallah Sayed Mossalem Ahmed Elshafei
Department of Basic Sciences, Higher Institute for Administrative Sciences, Belbeis, AlSharkia, Egypt

Abstract

This study evaluates the Life-Cycle/Permanent Income Hypothesis (LCPIH) focusing on the consumption response of households below retirement age in Egypt during the years 2000 to 2024. We use two quasi-experimental settings: the staggered release of public sector wages and the staggered implementation of energy subsidy reform. Using a large-scale household panel data set from ELMPS and HIECS, we strongly confirm significant, persistent deviations from LCPIH where households responded massively to pre-income change announcement. The MPC or marginal propensity to consume out of a transitory income shock in this paper is 0.42, This value is remarkably higher than the figures found in figure is significantly higher than when compared to any other benchmark calculated for the advanced economies.

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How to Cite
Salem, G. S., El-Raouf, M. M. A., El-Qurashi, M. A., & Elshafei, A. S. M. A. (2025). The Consumption Response to Income Fluctuations in Egypt: Evidence from Public Sector Wages and Subsidy Reforms. Journal of Cultural Analysis and Social Change, 10(4), 1736–1748. https://doi.org/10.64753/jcasc.v10i4.3074
Issue
2025: Volume 10 Issue 4
Section
Articles