This paper examines how generational cohorts influence households’ choices regarding housing tenure and considers the diverse preferences and socio-economic factors that shape decisions—using survey ...data on 425 families in Ho Chi Minh City, Vietnam. The data is analyzed using a multinomial logit model. The results indicate that generation significantly positively affects housing tenure choice, such that, unlike older cohorts, younger generations are more inclined to rent houses as their preferred housing option. Furthermore, permanent income plays a significant role in shaping housing tenure choices. On the other hand, social-economic variables, namely education, gender of references, family structures, and area of residence, were significant in influencing housing tenure decisions. This finding highlights the importance of housing policies prioritizing affordable and accessible rental options in large cities.
House Prices and Consumer Spending BERGER, DAVID; GUERRIERI, VERONICA; LORENZONI, GUIDO ...
The Review of economic studies,
07/2018, Letnik:
85, Številka:
3 (304)
Journal Article
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Recent empirical work shows large consumption responses to house price movements. This is at odds with a prominent theoretical view which, using the logic of the permanent income hypothesis, argues ...that consumption responses should be small. We show that, in contrast to this view, workhorse models of consumption with incomplete markets calibrated to rich cross-sectional micro facts actually predict large consumption responses, in line with the data. To explain this result, we show that consumption responses to permanent house price shocks can be approximated by a simple and robust rule-of-thumb formula: the marginal propensity to consume out of temporary income times the value of housing. In our model, consumption responses depend on a number of factors such as the level and distribution of debt, the size and history of house price shocks, and the level of credit supply. Each of these effects is naturally explained with our simple formula.
Despite solid theoretical foundations for the notion that poor, borrowing-constrained households will intertemporally manage assets to smooth consumption, the consumption-smoothing hypothesis has not ...always withstood empirical scrutiny. This paper reassesses the intertemporal asset management problem with a poverty trap model and shows that we would expect to see asset smoothing, not consumption smoothing, in the neighborhood of critical asset levels at which optimal accumulation behavior bifurcates. We then employ threshold estimation techniques to empirically confirm the co-existence of consumption and asset smoothing regimes using a household panel data set from West Africa. Households above the estimated threshold almost completely insulate their consumption from weather shocks, whereas those below the threshold do not. These results not only indirectly provide evidence of the existence of poverty traps but also speak to the level and incidence of the costs of uninsured risk.
Abstract
In 2009, the Australian Government delivered approximately $8 billion in direct payments to households. These payments were randomly allocated over a 5‐week period. Panel model estimates ...show that for the average household, there was no significant disbursement effect on nondurable consumption. Only for relatively young and low‐income households, for example, at the bottom 10th percentile of each, was there a significant positive effect of the tax bonus payment on nondurable consumption. We argue the null findings on average could be due to macroeconomic and institutional differences leaving Australian households less constrained than their U.S. counterparts.
We rely on Permanent Income to define a socioeconomic stratification system based on a latent trait measurement model using objective and widely available socioeconomic variables as reflective ...indicators, with an official panel of households spanning 2006-2020 in Spain. We obtain an objective and transparent stratification of Spanish society for these 15 years, and track social mobility at the household level between consecutive years that included economic expansion, a major recession, economic recovery and a major pandemic.We have quantified social mobility (greater in the extreme strata) in each of the periods of growth, crisis and economic recovery. Crisis derived from COVID-19 has been more drastic and has affected more the consumption of households under 65 years of age or with few members. In Spain, measures adopted against the effects of the COVID crisis have generated less inequality than those adopted during the Big Recession of 2008.
Retrospectives Forget, Evelyn L.
The Journal of economic perspectives,
10/2023, Letnik:
37, Številka:
4
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Margaret Gilpin Reid (1896–1990) began her career as a home economist and, with Dorothy Brady, Milton and Rose Friedman, played a central role in the development of the permanent income hypothesis at ...Chicago. Reid was the first woman to be elected Fellow of the American Economic Association, and was a key figure in the empirical tradition at the University of Chicago. This article examines the opportunities and constraints that shaped her career.
We examine the complex relationship between money and happiness. We find that both permanent income and wealth are better predictors of life satisfaction than current income and wealth. They matter ...not only in absolute terms but also in comparative terms. However, their relative impacts differ. The first exerts a comparison effect—the higher the permanent income of the reference group, the lower life satisfaction—the second exerts an information effect—the higher the permanent wealth of the reference group, the higher life satisfaction. We also show that negative transitory shocks to income reduce life satisfaction while transitory shocks to wealth have no effect. Lastly, we analyse the effects of their components and find that not all of them predict life satisfaction: permanent taxes do not matter, while only the value of permanent real estate, financial and business assets do. Finally, we use quantile regression and analyse to what extent our results vary along the well-being distribution, finding the impacts to be larger at lower levels of life satisfaction.
In the past, Sabah has often been reported as Malaysia’s poorest state, with the recorded highest incidence of absolute poverty among all the other states. The consumption patterns of households in ...Sabah have been significantly impacted by such circumstances. This further draws light on the adverse impact on the broader economy, as low levels of spending may restrict demand for products and services, stifling economic growth. The understanding of households’ consumption functions based on the Permanent Income Hypothesis (PIH) will advance knowledge in identifying the key factors that influence the households’ spending decisions. Pointing out the scant number of past studies done within this very context, and focusing on the Sabah state in particular, further motivated this study, this paper aims to develop a conceptual framework that can estimate and examine the households’ consumption functions in Sabah. As such, the methodology of drawing upon narrative reviews from research in the past will be used in this paper to develop the conceptual framework. The result of this study built upon the framework developed will help in identifying the factors that explain the households’ consumption patterns, in particular, whether the function estimated will be consistent with the Permanent Income Hypothesis (PIH). It is hoped that the conceptual framework built will aid in providing valuable empirical insight for policymakers in designing effective policies that can uplift households that are living in poverty.
The relative income hypothesis Alvarez-Cuadrado, Francisco; Van Long, Ngo
Journal of economic dynamics & control,
09/2011, Letnik:
35, Številka:
9
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Despite its theoretical dominance, the empirical case in favor of the permanent income hypothesis is weak. Contrary to one of its basic implications, a growing body of evidence suggests that rich ...households save a higher proportion of their permanent income than poor households. We propose an overlapping-generations economy where households care about relative consumption. As a result, an individual's consumption is driven by the comparison of his lifetime income and the lifetime income of his reference group; a permanent income version of
Duesenberry's (1949) relative income hypothesis. Across households the savings rate increases with income while aggregate savings are independent of the income distribution.
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