To accomplish the above objective, five consumption theories were selected and applied to the Iranian economy. Econometric methods and criteria were employed to estimate and evaluate the predictions of each consumption hypothesis. In general the empirical results of the study suggest that although there are many socio-economic differences between developed and less developed countries, they do not affect the applicability of the same consumption theories in both groups of countries. However, the interpretation and the marginal effects of variables in the consumption functions of less developed countries differ from the developed countries. The findings of this study also support the conclusions reached by a few other studies which have examined the relevance of consumption hypotheses in less developed countries.

Because most theoretical and empirical works in economics concentrate on the developed countries, their relevance to the less developed countries has been questioned by several groups, especially historical and institutional economists. The purpose of the study is to examine the validity of alternative consumption theories in the less developed economies by using Iran as a special case.