Relationship between income and expenditure for selected EU countries: A panel data approach

The relationship between income and consumption is one of the most popular subjects of econometrics and economics science that protects its popularity and became study to many subjects. The first studies in this subject is based on the German statistician Ernst Engel's ninenteenth century studies. So far to clarify the relationship between income and consumption was improved firstly Keynes's absolute income theory, and many other consumption theories. In this study, the relation between income and consumption was tried to be estimated by using panel data set that consists of chosen EU countries between 1996-2010. Panel unit root and panel co-integration tests are explained comprehensively in this study.