Showing papers on "Consumption (economics) published in 1993"

Credit Market Constraints, Consumption Smoothing and the Accumulation of Durable Production Assets in Low-Income Countries: Investments in Bullocks in India

Abstract: In this paper we formulate and estimate a finite-horizon, structural dynamic model of agricultural investment behavior that incorporates the major features of low-income agricultural environments: income uncertainty, constraints on borrowing and rental markets, and the use of investment assets to generate income and smooth consumption. The model is fit to longitudinal Indian household data on farm profits, bullock stocks, and pump sets. The estimated structural parameters are used to assess the effects on the life cycle accumulation of bullocks, agricultural profits, and welfare associated with complete markets and bullock liquidity and with second-best policies that provide assured sources of income to farmers and weather insurance.

Consumer demand and the life-cycle allocation of household expenditures

Abstract: The purpose of this paper is to estimate the parameters of household preferences that determine the allocation of goods within the period and over the life cycle, using micro data. In doing so, the authors are able to identify important effects of demographics, labor market status, and other household characteristics on the intertemporal allocation of expenditure. They test the validity of the life-cycle model using excess sensitivity tests and find that controlling for demographics and labor market status variables can largely explain the excess sensitivity of consumption to anticipated changes in income.

The Market for Luxury Goods: Income versus Culture

Abstract: Points out that identifying appropriate market segmentation bases has been a recurrent problem in marketing. Compares the predictive power of income and attitude towards cultural change in the context of luxury goods. The results show that those two indicators are rather independent from each other and contribute almost equally to explaining luxury goods consumption.

Saving and Growth: A Reinterpretation

Abstract: We examine the relationship between income growth and saving using both cross-country and household data. At the aggregate level, we find that growth Granger causes saving, but that saving does not Granger cause growth. Using household data, we find that households with predictably higher income growth save more than households with predictably low growth. We argue that standard Permanent Income models of consumption cannot explain these findings, but that a model of consumption with habit formation may. The positive effect of growth on saving implies that previous estimates of the effect of saving on growth may be overstated.

Common Trends and Common Cycles

Abstract: The existence of a serial correlation common feature among the first differences of a set of I(1) variables implies the existence of a common cycle in the Beveridge-Nelson-Stock-Watson decomposition of those variables. A test for the existence of common cycles among cointegrated variables is developed. The test is used to examine the validity of the common trend-common cycle structure implied by Flavin's excess sensitivity hypothesis and Campbell and Mankiw's mixture of rational expectations and rule-of-thumb hypothesis for consumption and income. Linear independence between the cointegration and the cofeature vectors is exploited to decompose consumption and income into their trend and cycle components. Copyright 1993 by John Wiley & Sons, Ltd.

The Importance of Precautionary Motives in Explaining Individual and Aggregate Saving

Abstract: This paper examines predictions of a life-cycle simulation model -- in which individuals face uncertainty regarding their length of life, earnings, and out-of-pocket medical expenditures, and imperfect insurance and lending markets -- for individual and aggregate wealth accumulation. Relative to life-cycle or buffer-stock alternatives, our augmented life-cycle model better matches a variety of features of U.S. data, including: (1) aggregate wealth, (2) cross-sectional differences in wealth-age and consumption-age profiles by education group, and (3) short-run time-series co-movements of consumption and income.

Consumption Over the Life Cycle and Over the Business Cycle

Abstract: The main aim of this paper is to assess the validity of the life cycle model of consumption. In particular, we address an issue that has recently received much attention, especially in the macroeconomic literature: that of "excess sensitivity" of consumption growth to income growth. We do this using a time series of cross sections and a novel and flexible parameterization of preferences. The former allows us to' address aggregation issues directly, while with the latter we can allow both the discount factor and the elasticity of intertemporal substitution eis to be affected by various observable variables and lifetime wealth. The main findings can be summarized as follows: (i) the excess sensitivity of consumption growth to labor income disappears when we control for demographic variables. This is true both at life cycle and business cycle frequencies. (ii) estimation of a flexible specification of preferences indicates that the elasticity of intertemporal substitution is a function of several variables, including the level of consumption. The eis increases with the level of consumption, as expected. (iii) the variables that change the eis are also important in explaining why we observe excess sensitivity over the business cycle. (iv) we are able to reconcile our results with those reported both in the macro and micro literature. (v) in our specification the elasticity of intertemporal substitution is not very well determined. This result, however, should be taken with care, as we have not made an effort to construct a 'preferred' specification, which would probably include additional controls for labor supply behavior. The evidence presented shows that the life cycle model cannot be easily dismissed. Indeed, we believe that the model does a good job at representing consumption behavior both over the life cycle and over the business cycle.

Structural Economic Dynamics

Abstract: Preface Acknowledgements List of symbols 1. Economic theory and the neglect of structural change 2. A pure labour production economy 3. Proportional dynamics 4. Structural dynamics 5. The evolving structure and level of prices 6. Consumption, savings, rate of interest and inter-temporal distribution of income 7. On the evolving structure of long-term development 8. From the 'actual' towards the 'natural' economic system - the role of institutions 9. Boundedness of economic systems, and international economic relations References Index.

Saving, Growth, and Aging in Taiwan

Abstract: This paper examines issues of household saving growth and aging in Taiwan. The Taiwanese patterns of high income growth declines in fertility and increases in life expectancy all have implications for life-cycle saving. We use data from fifteen consecutive household income and expenditure surveys from 1976 to 1990 to examine whether observed profiles of consumption and saving are consistent with life-cycle theory. The patterns of consumption and saving across households of different ages and cohorts appear to be broadly consistent with a life-cycle model. However the data also indicate that household consumption tracks income closely and this evidence casts doubt on simple life-cycle theory. (EXCERPT)

Intra Household Allocation of Consumption: a Model and some Evidence from French Data

Abstract: The goal of this paper is twofold. First, we reproduce upon French data previous tests of the so-called "income pooling" hypothesis, a conse quence of traditional models of household behaviour according to which only total income-and not income distribution across members-should matter. We find that income pooling is rejected: for a given level of total income, the share of husband's and wife's own income significantly affects the structure of consumption. Our second purpose is more innovative. We construct a theoretical model of collective decision making, based upon the efficiency assumption of collective decision making. Both our setting and the traditional, household preference model can be nested within a family of functional forms. The collective model generates specific restrictions upon the parameters that can the tested. Those restrictions turn out not to be rejected by the data.

Gaining ground: poverty in the postwar United States

Abstract: Official measures of poverty in the United States are compiled by the Bureau of the Census by comparing a household's income level to a prespecified threshold. From a theoretical perspective it is more appropriate to evaluate the level of poverty using a consumption-based measure of household welfare. In this paper I evaluate the level of poverty using expenditure data from the Consumer Expenditure Survey. I find that consumption-based poverty rates are much lower than those based on income. The trend in the poverty rate in the United States is sensitive to the price index and equivalence scales used to adjust the poverty thresholds.

Consumption and Income Seasonality in Thailand

Abstract: Many households in developing countries rely on seasonal agriculture for their incomes. This paper investigates whether household consumption expenditure tracks income across seasons. Using data from Thailand, I contrast the seasonal consumption patterns of households with different seasonal income patterns and estimate the responsiveness of seasonal consumption to seasonal income. I find little evidence that consumption tracks income over the course of the year. The findings suggest that observed seasonal consumption patterns are the result of seasonal variations in preferences or prices, common to all households, rather than an inability of households to use savings behavior to smooth consumption.

Are Industrial-Country Consumption Risks Globally Diversified?

Abstract: What idiosyncratic consumption risks can countries trade away on international asset markets? This paper develops an empirical methodology for answering the question. The tests are based on the proposition that in an integrated world asset market with representative national agents, the ex post difference between two countries' intertemporal marginal rates of substitution in consumption is uncorrelated with any random variable on which contractual payoffs can be conditioned. This result is applied to annual time-series data for the seven largest industrial countries over 1950-88. Of these countries, Germany seems to have been most successful at internationally diversifying its consumption risks.

Consumption and the recession of 1990-1991

Abstract: The paper looks at the recession of 1990-91. It reaches two conclusions: Not all recessions have the same dynamics. Decreases in output which come from other sources than consumption shocks tend to be short lived, and followed by sharp recoveries. Decreases in output which come from consumption shocks, decreases in consumption given income, tend to be longer lasting, and followed by weaker

Consumption And Real Exchange Rates In Dynamic Economies With Non-traded Goods

Abstract: We examine the possibility that nontraded goods may account for several striking features of international macroeconomic data: large, persistent deviations from purchasing powerparity, small correlations of aggregate consumption fluctuations across countries, and substantialinternational real interest rate differentials. A dynamic, exchange economy is used to show that nontraded goods in principle can account for each of these phenomena. In the theory there is a close relation between fluctuations in consumption ratios and those in bilateral real exchange rates, but we find little evidence for this relation in time series data for eight OECD countries.

Working Wives and Food away from Home: The Box-Cox Double Hurdle Model

Abstract: Household expenditures on food away from home are analyzed with the use of the BLS' 1989 Consumer Expenditure Survey. Parameterization and distributional assumptions of Cragg's double‐hurdle model are generalized for this purpose, and the resulting model outperforms the more traditional ones. Results suggest households with working wives and those with higher income are more likely to consume food away from home and also to consume more than others. Wife's age and household size increase the conditional level of consumption. Education has conflicting effects on probability and conditional level of consumption.

Consumer response to the timing of income: Evidence from a change in tax withholding

Abstract: In 1992, the income tax withholding tables were adjusted so that withholding was reduced. A typical worker received an extra $28.80 in take-home pay per month in March through December 1992, to be offset by a lower tax refund in 1993. The change in withholding amounted to 0.5 percent of GDP. President Bush, who proposed this change in his State of the Union address, intended that it provide a temporary stimulus to demand. But the policy change involved only the timing of income, so, under the life-cycle/permanent-income model, it would be predicted to have a negligible effect on consumption and aggregate demand. This paper reports consumers' responses to the change in withholding. The results are based on a survey taken shortly after it went into effect. Forty-three percent of consumers report spending the extra take-home pay--substantially more than the zero percent predicted by the standard models, but substantially less than the one hundred percent upon which the policy was predicated. The decision to save the income is not explained by expected income growth. Therefore, while behavior of many households is not fully consistent with the life-cycle/permanent-income model, liquidity constraints do not appear to account for this behavior.

Precautionary Savings and the Permanent Income Hypothesis

Abstract: This paper derives the explicit solution of a dynamic stochastic optimal consumption problem for infinitely-lived agents whose preferences exhibit, in the presence of non-diversifiable labour income uncertainty, a constant elasticity of intertemporal substitution and constant absolute risk aversion. The constancy of the elasticity of intertemporal substitution, which implies that marginal utility at zero consumption is infinite, guarantees that the non-negativity constraint on consumption is never binding along the optimal path. The assumption of constant absolute risk aversion allows an explicit computation of human wealth, and provides a simple representation of the precautionary savings motive.

Wages, seniority, and the demand for rising consumption profiles

Abstract: In many occupations, wages rise faster than productivity over the life cycle. Other authors have suggested a variety of explanations for this pattern. We argue that these explanations fail for at least two occupations - commercial airline pilots and intercity bus drivers. We then explore an alternative explanation based on the assumption that satisfaction depends on not only the level of consumption but also its rate of change. We argue that upward sloping wage profiles are an expedient substitute for personal savings as a means for achieving upward sloping consumpion profiles.

The World of Consumption: The Material and Cultural Revisited

Abstract: Preface 1. Introduction and Overview 2. From Economics Imperialism to Globalization 3. The World of Commodities 4. Use Value and Consumption 5. Consumption through Systems of Provision 6. Systems of Provision and Cultural Systems 7. Economics and Consumption 8. What is Consumer Society? 9. Whatever Happened to Public Consumption? 10 Welfarism in Light of Globalization 11. Whither Consumption Studies?

Are Industrial-Country Consumption Risks Globally Diversified?

Abstract: What idiosyncratic consumption risks can counties trade away on international asset markets? This paper develops an empirical methodology for answering the question. The tests are based on the proposition that in an integrated world asset market with representative national agents, the ex post difference between two countries' intertemporal marginal rates of substitution in consumption is uncorrelated with any random variable on which contractual payoffs can be conditioned. This result is applied to annual time-series data for the seven largest industrial countries over 1950-88. Of these counties, Germany seems to have been most successful at internationally diversifying its consumption risks.

Measuring the Income Effects of Migrant Remittances: A Methodological Approach Applied to Greece

Abstract: There is an ongoing debate on how the often voluminous migrant remittances are used and to what extent they contribute to the development of the migrant's country of origin. There are surveys on how remittance recipients spend their income and discussions on how effective government policies are in attracting remittances. In fact, there is quite a literature, often negative, concerning the contribution of remittances to productive investment. This literature looks at remittances in a variety of ways. Concerning the substance of the inquiry, some of the writers investigate the impact of remittances as a compensating factor for the losses of the human capital invested in emigrants or, in a more general way, as a parameter in the overall impact of migration.' Others discuss the impact of remittances alone, separated from the impact of migration flows.2 From a methodological point of view, some of the theoretical analyses are cast in macroeconomic terms and are based on a tradednontraded goods model, in which labor is exchanged for remittances, whereas capital is immobile.3 Other writers examine the welfare effects of remittances alone or jointly with the effects of migration.4 Most of this literature, however, focuses on the first round of remittance spending and ignores the diffused multiple effects, thus producing inconclusive evidence on the impact of remittances on the economy.5 There is, in particular, little specific research on how aggregate output and employment are affected, and very limited sectoral and regional investigation of the issue.6 This article attempts a disaggregated sectoral analysis of the income effects of remittances on consumption, production, imports, em-

Alcohol consumption in the European Community: uniformity and diversity in drinking patterns

Abstract: Within the European Community (EC) drinking patterns in the southern countries can be characterised by daily consumption of wine at meals, and in the northern countries by less frequent consumption of beer outside meals. Yet, as in past decades in the southern countries beer consumption and in the northern countries wine consumption strongly increased, the question is whether the distinction in drinking patterns still applies. This paper (1) describes for each country of the EC total alcohol consumption, (2) examines the frequency and the context of consumption of the new beverage type and (3) analyses whether subpopulations, defined by sex, age and educational level, differ in the adoption of the new beverage type. In all countries wine is consumed more often at meals compared to beer. Older people consume wine in greater numbers and more frequently than younger people, who consume beer in greater numbers. People of higher educational level consume the new beverage type more often compared to people of lower educational level, who consume the traditional beverage type more frequently. Finally, males and females differ less in the frequency of consumption of the new beverage type than in the frequency of the traditional beverage type.