Showing papers on "Consumption (economics) published in 1985"

Human capital and the rise and fall of families

Abstract: This paper develops a model of the transmission of earnings, assets, and consumption from parents to descendants. The model assumes utility-maximizing parents who are concerned about the welfare of...

The Time Series Consumption Function Revisited

Abstract: THE RELATIONSHIP between consumer spending and income is one of the oldest statistical regularities of macroeconomics-and one of the sturdiest. Like the aging movie star, it needs a little touching up now and again, but always seems to come bouncing back. A dozen years ago, both the theoretical derivation and the econometric form of the aggregate consumption function were considered settled. Most economists adhered to one of two ways of putting Fisher's theory of intertemporal optimization into operation: Milton Friedman's permanent income hypothesis (henceforth, PIH) or Franco Modigliani's life-cycle hypothesis (henceforth, LCH). ' Since each variant seemed to have sound theoretical underpinnings, and since the two had similar econometric forms that explained the data well and had similar implications for policy, there was not a great deal to quarrel about. Perhaps the most contentious empirical issue was the apparently large marginal

Implicit Contracts: A Survey

Abstract: 7mplicit contracts resolve the distribution of uncertainty and utilization of specific human capital between risk averse workers and less risk averse firms. Incomplete contracts are required to yield involuntary layoffs in contract markets: otherwise, contracts are efficient and pareto optimal by construction. There is a close relation between contract theory and neoclassical labor market theory. Contracts smooth consumption, but increase the volatility of labor supply and labor utilization to demand disturbances, because contractural insurance eliminates the income effects of socially diversifiable risks. This result is similar to the intertemporal substitution hypothesis. However, the price mechanism in a contract is substantially different. Contracts embody a nonlinear two-part pricing scheme. The lump sum part allocates the income-consumption consequences of risks and the marginal pricing part allocates production and labor utilization. This implicit pricing mechanism is in all respects "flexible," though the observed average hourly wage combines both parts and may give the outward appearanceof rigidity. Furthermore, the observed average wage rate in a contract does not reflect marginal conditions necessary for structural econometric estimation. Indivisibilities appear necessary to account for the split between work-sharing and layoffs. Contracts with private information are also considered in the nonlinear pricing context.(This abstract was borrowed from another version of this item.)

The Effect of Liquidity Constraints on Consumption: A Cross-Sectional Analysis

Abstract: This paper examines the effect of liquidity constraints on consumption expenditures using a single-year cross-section data set. A reduced-form equation for consumption is estimated on high-saving households by the Tobit procedure to account for the selectivity bias. Since high-saving households are not likely to be liquidity constrained, the estimated equation is an appropriate description of how desired consumption that would be forthcoming without liquidity constraints is related to the variables available in the cross-section data. When the reduced-form equation is used to predict desired consumption, the gap between desired consumption and measured consumption is most evident for young households.

Estimating the Continuous Time Consumption Based Asset Pricing Model

Abstract: The consumption based asset pricing model predicts that excess yields are determined in a fairly simple way by the market's degree of relative risk aversion and by the pattern of covariances between percapita consumption growth and asset returns Estimation and testingis complicated by the fact that the model's predictions relate to the instantaneous flow of consumption and point-in-time asset values, but only data on the integral or unit average of the consumption flow is available In our paper, we show how to estimate the parameters of interest consistently from the available data by maximum likelihood We estimate the market's degree of relative risk aversion and the instantaneous covariances of asset yields and consumption using six different data sets We also test the model's overidentifying restrictions

Tests for Liquidity Constraints: A Critical Survey

Abstract: This paper surveys recent empirical work on tests for liquidity constraints.The focus of the survey is on the tests based on the Euler equation. After examining the technical aspects of the recent tests on aggregate time-series data and on micro data, the survey tries to evaluate their economic significance. The paper concludes that for a significant fraction of the population the behavior of consumption over time is affected in away predicted by credit rationing and differential borrowing and lending rates. However, the available evidence is shown to have failed in providing information necessary to calculate the response of consumption to changes in the time profile of income.The paper attributes the failure to the fact that not much attention in the literature has been paid to the cause of liquidity constraints.

Fish, fatty acids, and human health.

Abstract: Three studies published in this issue of the Journal support the possibility that the consumption of fish may be of special benefit to human health. One of the studies1 shows that the consumption o...

Consistent Estimation of the Impact of Tax Deductibility On the Level of Charitable Contributions

Abstract: When charitable contributions are tax deductible, the marginal price of charitable giving in other consumption foregone per dollar of contributions is generally less than unity. Further, if the income tax schedule is a progressive step function, the marginal price of contributions is generally a rising step function of the level of contributions. The problem of estimating a contributions demand function for individuals is therefore complicated by the spurious correlation between the level of contributions and the observed marginal price. We take this econometric problem into account in estimating a contributions demand function using data from the 1972-73 Consumer Expenditure Survey. After comparing our results with those of estimation techniques used by other authors, we provide evidence on the impacts of alternative tax policies on charitable giving using our estimates of the model parameters.

Longitudinal Analysis of Labor Market Data: Interpreting empirical models of labor supply in an intertemporal framework with uncertainty

Abstract: Introduction Much of the empirical work on labor supply ignores life cycle theory, and practically none of it admits the possibility that consumers are uncertain about future events. A natural question that arises concerns the implications of these factors when evaluating and interpreting estimates of wage and income effects found in the existing literature. This study provides an answer to this question. While the discussion here concentrates on hours of work behavior, it fully applies to the analysis of consumption behavior as well. The chapter begins with the development of an economic model of consumption and labor supply behavior in an intertemporal environment in which the consumer is uncertain about his future income, the future relative prices of consumption and leisure, and variables influencing his future preferences. A consumer making decisions in this model reacts differently to changes in variables than he would in a deterministic setting. In response to a change in the current wage rate, for example, the adjustment the consumer makes in his consumption and in hours of work depends on how much of this change was anticipated and how it alters expectations concerning future wages. Because the economic model considered here explicitly addresses such issues, it provides some direction on how to account for the various aspects of uncertainty when specifying empirical relations.

Cities and Services: The geography of collective consumption

Abstract: Caught between the twin pressures of rising public expectations and falling resources, public services have become the subject of intense academic scrutiny and public debate. Much of this controversy has been fuelled by a growing realisation that where people live has an important influence upon their access to services. The so-called 'postcode lottery.' The first part of this book considers what is meant by the term 'collective consumption' and discusses the main differences between the British and American loyal government systems. It examines various geographical schools of analysis which focus on jurisdictional partitioning, locational efficiency, externalities and locational conflict. Subsequent chapters explore the relevance of public choice, neo-Weberian and neo-Marxist theories for an understanding of collective consumption. The final section looks at ways in which spatial perspectives can be linked with broader theoretical approaches in the context of modern developments. This book was first published in it's current form in 1985.

French-English Canadian Subcultural Consumption Differences:

Abstract: Consumption differences were examined between French-speaking, bilingual, and English-speaking Canadian families from the greater Ottawa/Hull metropolitan area. Significant differences were found f...

Consumption Experience and Sales Promotion Expenditure

Abstract: An economic theory of habit formation through consumption learning is developed to explain order differences in relative sales promotion expenditures among brands. The theory applies to consumer brands in equilibrium markets, where consumer information from sources other than advertising, sales promotion, and previous consumption experience is negligible. Three propositions are derived from the theory: brands with more consumption experience (1) spend proportionately less on sales promotion as well as (2) on advertising and promotion combined, and (3) place proportionately more emphasis on advertising relative to sales promotion. These propositions are formulated as hypotheses and tested against empirical data from the PIMS project. It is found that the data are generally consistent with the propositions. In order to examine the robustness of the results, the hypotheses are subjected to three different empirical tests, each with different assumptions. The findings are shown to be reasonably robust with re...

Chapter 8 Input-output models, national economic models, and the environment

Abstract: Publisher Summary Pervasive environmental spillovers are replacing the now outmoded bees and apple orchards as the economists' examples of external effects. The “materials balance” approach underlines the generality of residuals as the normal outcome of the throughput of materials in the course of production and consumption activities. Residuals measured in weight are defined by the difference between the weight of the total material inputs to an activity and the weight of the products that are the objective of the activity, plus the weight of net accumulation of tangible assets in the activity. The chapter reviews that the receiving bodies of Nature, the environmental receptors, play a decisive role in the economic analysis of pollution. It discusses that the receptors provide man with two types of services: residual disposal services and environmental services. The former type relates to the inherent generation of residuals by the materials-processing economy of an industrialized state; the latter type is an omnivorous category of recreation activities such as sport fishing, boating, amenity services, aesthetic values, including the intrinsic value of Nature, and the provision of extraction possibilities from mineral deposits, water, and air.

Modern Varieties, International Agricultural Research, and the Poor

Abstract: Plan t breeders select f o r roots , leaves and s ta lks , making efficient and stable use of waterr n u t r i e n t s and l ight . Therefore, i n many environments, modern v a r i e t i e s (MV) now produce higher y i e l d s of less c o s t l y c a l o r i e s and less vulnerabili ty t o drought and disease, even without purchased inputs , per ton of food. Physical r i sks (e.g. the narrow genet ic base of sane p lan t s , and " s o i l mining") a r e r e a l , but have been exaggerated. The bio-econanic impact of MVs should be e spec ia l ly favorable t o smaller farmers, hired workers, and poor consumers, y e t much of t h i s "pro-poor poten t ia l" has been l o s t due t o (a) i n s e r t i o n of MVs i n t o social systems favoring urban groups and the b ig farmers who supply them, (b) demographic dynamics making labor cheaper relative t o land, and (c) research s t r u c t u r e s p r i o r i t i z i n g fashionable t o p i c s rather than genuine needs of the poor. Too much research i n t o "how MVs affect the poor" still focuses on small farmers i n MV-affected areas. I n general these adopt MVs l a t e r than bigger farmers, bu t then a t t a i n a t least as high adoption r a t e s , i n t e n s i t i e s , y i e l d s , and efficiency. Only except ional ly a r e they dispossessed before they can gain from MVs. But e a r l y adopters , who go t better prices, gained more from MVs (see (a) above). Alsor most poor farmers i n South Asia and Africa are still ou t s ide MV areas . As producers they have probably l o s t from MVs. Especially i n South and Southeast Asia, the r u r a l poor are increas ingly l abore r s rather than farmers. MVs raise demand f o r l abor per acre and clearly re su l t ed i n r a i sed employment around 1965-75. More recently, farm employers

Chapter 3 Public sector pricing

Abstract: Publisher Summary This chapter discusses public sector pricing. Prices are an excellent instrument for coordinating supply and demand, provided people who do not pay can be excluded from consumption. Hence, prices are used not only by private entrepreneurs, but also by politicians, bureaucrats, and public utility managers. Public prices can be found in almost every economic activity. However, looking across countries, there are particular areas where public pricing is more likely to be found than in others. These areas are closely associated with supplying essential goods and services, either to industries or directly to consumers. “Essential” means that they cannot be cut off without danger of total or partial collapse of an economy. Essential goods and services are almost the same in all industrialized countries. Hence, it is possible to present a fairly general basic catalogue of candidates for public pricing. How many of these candidates are priced publicly in any one country, depends on the prevailing degree of confidence in the efficiency of the private sector, which differs from country to country.

The voluntary simplicity consumer

Abstract: Most marketing executives are aware by now that some consumers believe that “small is beautiful” and “less is more.” Such executives may be surprised to find out that this type of voluntary simplicity consumer (VSC) is the fastest‐growing market segment in the U.S. Who the voluntary simplicity consumers are, how they came about, and how to cater to them profitably are the subjects of this article. The VSC is the outcome of a lifestyle trend toward voluntary simplicity (VS), but unlike any other market segment, the VSC prefers a lifestyle of low consumption, ecological responsibility, and self‐sufficiency. As a result, marketers are often puzzled as to how to market to the VSC.

Importance of total life consumption of cigarettes as a risk factor for coronary artery disease

Abstract: Cigarette smoking is an established risk factor for the occurrence of cardiovascular events and mortality. Whether recent smoking history or total life consumption best represents the increased risk due to smoking has not been previously established. Thus, stepwise logistic regression analysis was used to determine the relative contributions of these factors to the risk of having significant coronary artery disease in 1,349 patients who underwent cardiac catheterization. Six risk factors were analyzed: total pack-years, current packs smoked per day, age, gender, family history and symptomatic status. The results of this analysis showed that total pack-years, but not current packs per day, is a significant independent risk factor for the development of coronary artery disease. This was true in every age group up to but not older than age 70 years. Although the overall risk was lower in younger patients and in patients with less typical symptoms of angina, the relative risk in cigarette smokers relative to pack-years was consistently greater. The risk of total life consumption of cigarettes is thus greater than has heretofore been realized, particularly in persons who would otherwise be categorized as low risk.

Bureaucracy and the divisibility of local public output

Abstract: The empirical results of this paper are derived from a monopoly view of local government decisionmaking in contrast to the competitive view offered by earlier researchers. That our results are similar to earlier findings lends additional support to the conclusion that local output is largely private in nature. Other than park and recreation services, there appear to be no economies in consumption for local services, nor any economies of density. Larger cities do not appear to be more efficient than smaller cities.10 Of course, this result holds only for the sample of cities used here and does not rule out scale economies for communities smaller than those in our sample (i.e., below 25,000 population). The pure public goods case is frequently cited as a justification for the provision of many services by local government, and for increasing the size and reducing the number of local jurisdictions. Therefore, it is noteworthy that empirical tests derived from models that have employed differing assumptions about the monopoly power of local government have found little evidence to support these arguments for consolidating local government.

Aggregate consumption and deficit financing: an attempt to separate permanent from transitory effects

Abstract: Many previous empirical studies of the Ricardian Equivalence Hypothesis have found a relatively high degree of future tax liability discounting such that current deficits appear to have relatively little or no influence on current consumption demand. However, the validity of these empirical estimates can be questioned as they may not have adequately distinguished between permanent and transitory income flows. This paper attempts to address this problem by using cycle-averaging as a simple method of capturing the permanent path of income over time. The empirical evidence generated in this paper rejects the strict debt neutrality proposition of the Ricardian Equivalence Hypothesis.