Download or read book Consumption Response to Expected Future Income written by Laurie Pounder and published by . This book was released on 2009 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: consuption "This paper shows empirical evidence in favor of forward-looking household consumption--that consumption today depends directly on household-specific ex-ante expectations of future income. This analysis is unique in using a direct consumption measure combined with an ex-ante household-specific measure of expected future income, constructed from detailed survey and administrative data on Social Security, pensions, and retirement plans. Households with high expected future income spend more today than households that have lower future income but identical current income and net worth. Omitting household-specific future income can cause mis-estimation of key consumption questions. Furthermore, when all three resources for consumption (current income, net worth, and future income) are accounted for, the average propensity to spend out of current income is similar to predictions of optimal consumption under uncertainty in a dynamic stochastic model, although the propensities to spend out of accumulated net worth and expected future income are notably lower in the data than the optimal model. Finally, these data also provide evidence on the effect of risk on consumption while controlling for all three resources. Households with high measured risk aversion consume less out of future income. All households, on average, consume more out of the more predictable sources of future income, such as future Social Security benefits"--Federal Reserve Board web site.

Download or read book Consumption Response to Expected Future Income written by Laurie DeMarco and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper shows empirical evidence in favor of forward-looking household consumption--that consumption today depends directly on household-specific ex-ante expectations of future income. This analysis is unique in using a direct consumption measure combined with an ex-ante household-specific measure of expected future income, constructed from detailed survey and administrative data on Social Security, pensions, and retirement plans. Households with high expected future income spend more today than households that have lower future income but identical current income and net worth. Omitting household-specific future income can cause mis-estimation of key consumption questions. Furthermore, when all three resources for consumption (current income, net worth, and future income) are accounted for, the average propensity to spend out of current income is similar to predictions of optimal consumption under uncertainty in a dynamic stochastic model, although the propensities to spend out of accumulated net worth and expected future income are notably lower in the data than the optimal model. Finally, these data also provide evidence on the effect of risk on consumption while controlling for all three resources. Households with high measured risk aversion consume less out of future income. All households, on average, consume more out of the more predictable sources of future income, such as future Social Security benefits.

Download or read book What is more important in case of consumption Current income or expectations written by Gabriele Pauliuk and published by GRIN Verlag. This book was released on 2021-03-18 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2014 in the subject Sociology - Consumption and Advertising, , language: English, abstract: The main goal of this paper will be to determine which of the two is more important in case of consumption. First of all, a theoretical analysis of the possible explanations of each relationship based on the existing literature will be presented. Then the research will proceed to the empirical tests (correlation and regression using SPSS Statistics software) of a created model based on consumption, gross national income as well as length of retirement in the United States and the United Kingdom over the period of 46 years. The piece will finalise with some general conclusions that can be drawn from the conducted research. Consumer behaviour is a subject of interest to many different players in the economy. Companies gather information on their current and potential customers to determine their selling and production strategies based on what their target customers might want, need, the timing at which to introduce new products, the prices to suit their tastes etc. Governments use the information on their citizens’ spending habits to figure out what policies to implement to receive effective results and garner political support for re-election. People themselves should be acquainted with the subject of consumer behaviour to better understand and use personal spending under different political, economic and social circumstances to lead more stable lives. Because of the immense interest in the subject of consumption many efforts have been put into research to distinguish the most important factors that influence consumer behaviour and so far much of such literature has been dedicated to the influence of current income and expectations (specifically expectations about future income).

Download or read book The Economics of Consumption written by Tullio Jappelli and published by Oxford University Press. This book was released on 2017-09-01 with total page 313 pages. Available in PDF, EPUB and Kindle. Book excerpt: Consumption decisions are crucial determinants of business cycles and growth. Knowledge of how consumers respond to the economic environment and how they react to the risks that they encounter during the life-cycle is therefore important for evaluating stabilization policies and the effectiveness of fiscal packages implemented in response to economic downturns or financial crises. In The Economics of Consumption, Tullio Jappelli and Luigi Pistaferri provide a comprehensive examination of the most important developments in the field of consumption decisions and evaluate economic models against empirical evidence. The first part of the book provides the basic ingredients of economic models of consumption decisions. The central part reviews the empirical literature on the effect of income and wealth changes on consumption and on the relevance of precautionary saving and credit market imperfections. The last chapters extend the basic framework to such important areas as bequests, leisure, lifetime uncertainty, and financial sophistication. Jappelli and Pistaferri shed light on important issues, including how consumption responds to changes in economic resources, how economic circumstances and consumers' characteristics influence behavior, and whether consumption inequality depends on income shocks and their persistence.

Download or read book National Saving and Economic Performance written by B. Douglas Bernheim and published by University of Chicago Press. This book was released on 1991-05 with total page 408 pages. Available in PDF, EPUB and Kindle. Book excerpt: "... Papers presented at a conference held at the Stouffer Wailea Hotel, Maui, Hawaii, January 6-7, 1989. ... part of the Research on Taxation program of the National Bureau of Economic Research." -- p. ix.

Download or read book The Consumption Response to Income Changes written by Tullio Jappelli and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: We review different empirical approaches that researchers have taken to estimate how consumption responds to income changes. We critically evaluate the empirical evidence on the sensitivity of consumption to predicted income changes, distinguishing between the traditional excess sensitivity tests, and the effect of predicted income increases and income declines. We also review studies that attempt to estimate the marginal propensity to consume out of income shocks, distinguishing between three different approaches: identifying episodes in which income changes unexpectedly, relying on the covariance restrictions that the theory imposes on the joint behavior of consumption and income growth, and combining realizations and expectations of income or consumption in surveys where data on subjective expectations are available

Download or read book The Consumption Response to Positive and Negative Income Changes written by Philip Bunn and published by . This book was released on 2017 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: A set of newly added questions in the 2011 to 2014 Bank of England/NMG Consulting Survey reveals that British households tend to change their consumption by significantly more in reaction to temporary and unanticipated falls in income than to rises of the same size. Household balance sheet characteristics (including the presence of a savings buffer), concerns about credit market access and higher subjective risk of lower future income account for a sizable share of this spending asymmetry and explain significant variation in the marginal propensity to consume across households. Our findings have important implications for predicting the response of aggregate consumption to expansionary and contractionary macroeconomic policies.

Download or read book Weekly Weather and Crop Bulletin written by and published by . This book was released on 1994 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Wealth Disposable Income and Consumption written by R. Tiff Macklem and published by . This book was released on 1994 with total page 67 pages. Available in PDF, EPUB and Kindle. Book excerpt: This report develops a measure of aggregate private sector wealth in Canada that includes financial, physical, and human wealth, and examines the ability of this wealth measure to explain aggregate consumption. The relationship between consumption and wealth is explored both to gauge the usefulness of the wealth measures developed and to improve upon empirical consumption models for Canada. The study augments the standard EC consumption model with a comprehensive measure of wealth, thus partly bridging the gap between life cycle-permanent income consumption equations and the more empirically motivated EC consumption models based on disposable income.

Download or read book The Response of Consumption and Wives Leisure to Future Income Growth written by Jeremy J. Nalewaik and published by . This book was released on 2003 with total page 386 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Expected Taxes and Household Consumption Behavior written by Lorenz Kueng and published by . This book was released on 2012 with total page 107 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this dissertation I ask two basic questions: First, how predictable are personal income tax changes in the U.S. and second, does household consumption respond to news about future tax changes, or does it mostly respond at the time when the tax rates actually change? These are interesting questions because they have broad implications for macroeconomics and public economics. The rational-expectations life-cycle theory of consumption is the workhorse in modern macroeconomics. While there are various specifications of this theory, two predictions are common across them. First, consumption should not respond to predictable income changes and second, consumption should respond to news about future after-tax lifetime income. There is a large literature that tests the first implication of the rational-expectations life-cycle theory and generally rejects the model by finding significant consumption responses to predictable income changes -- that is, it finds that consumption is in fact excessively sensitive to predictable income changes. Very few studies focus on the theory's second main prediction, that household consumption responds to news about after-tax income changes, even if current after-tax income has not changed yet. To the best of my knowledge this dissertation is indeed the first study to use micro-level data to estimate the consumption response to news. I use fiscal policy to study these two questions because it offers two main advantages over other empirical frameworks commonly used by macroeconomists to test the consumption theory and to analyze the effect of news on macroeconomic aggregates. First, exploiting the fact that there is a lag between the decision to change taxes and the implementation of the tax changes allows me to separate the behavioral response to news from the response to the actual policy changes. Therefore, the response to tax news is not confounded by the response to the actual tax change. Second, actual tax changes are directly observable without measurement issues, which is different from other news shocks that have been recently studied, in particular news about future total factor productivity. Therefore, my measure of news about future taxes can be directly compared with the actual evolution of the tax rates. Regarding public economics, this dissertation addresses another question that is of interest to public policy makers. During the current Great Recession, in which conventional monetary policy is not effective due to the zero lower bound on nominal interest rates, policy makers have shifted attention to fiscal interventions. In order to assess the effectiveness of fiscal policy we have to know the total effect of a tax reform on the economy, i.e. the tax multiplier. Unfortunately, almost all studies that provide estimates of tax multipliers focus on the response of the economy to actual tax changes. These estimates might miss a fraction of the total effect of a tax reform if tax changes are predictable and if the behavior of economic agents is forward-looking. Ignoring anticipation effects can therefore bias the tax multiplier downward. The identification of news about future tax rates is key for answering these questions. In this dissertation I exploit the fact that there exist two classes of fixed-income securities in the U.S. that are very similar except for the tax treatment of their income streams. Interest on municipal bonds is tax-exempt, while interest on Treasury bonds is subject to federal income taxes; thus, relative price changes between municipal and Treasury bonds reflect changes in expected future tax rates, holding fixed other risk factors. I go beyond identification of the timing of news to directly measure the entire path of expected tax rates. The fact that different bonds have different maturities quantifies the degree of tax foresight, since yield spreads of bonds with different maturities reflect information about future taxes over different horizons. Hence, the tax news shocks derived from the bond prices measure not only when households receive information, but also what information they receive. Identifying the entire path of expected tax rates in turn is important for testing the basic rational-expectations life-cycle model of consumption, as the theory predicts that consumption responds one-for-one to changes in expected after-tax lifetime income. The term structure of municipal yield spreads identifies the expected persistence of a tax shock, which is a crucial factor that determines the optimal consumption response according to the theory. For instance, if a tax change is expected to be only transitory, then the theory predicts that consumption does not respond much. On the other hand, if a tax reform is expected to have a large persistent component, then consumption should respond much stronger. Combining these market-based tax expectations with consumption data from the Consumer Expenditure Survey I find that consumption of high-income households increases by close to 1% in response to news of a 1% increase in expected after-tax lifetime income, consistent with the basic rational-expectations life-cycle theory. On the other hand, households who have lower income, less education, or are more credit constrained respond less to news. However, the same households also respond one-for-one with large news shocks, consistent with rational inattention.

Download or read book The Influence of Future Income on Present Spending written by Anja Schanbacher and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: According to economic theory, consumers should boost present consumption when anticipating an income increase and reduce consumption when anticipating a decrease. Yet, many studies have observed a lack of such consumption smoothing. We investigate a psychological factor that can predict when consumers will adjust their current consumption to future income changes: self-continuity, or a sense of identification with and connection to the circumstances of the future self. We propose that consumers tend to perceive lower self-continuity when anticipating an income increase compared to a decrease. Consistent with this notion, we show that consumers are less likely to adjust present discretionary spending upward when anticipating an income increase than to adjust spending downward when anticipating an income decrease. Further, manipulations of self-continuity mitigate the asymmetry: when we induced high self-continuity, consumers adjusted spending to both future income increases and decreases, and when we induced low self-continuity, consumers adjusted present spending neither to future income increases nor to decreases. This demonstrates the role of self-continuity above and beyond other factors potentially contributing to the asymmetry, such as loss aversion and diminishing marginal utility. Six studies involving scenarios as well as real income expectations and behavior support the notion that consumers are more likely to smooth consumption when they perceive a higher sense of self-continuity.

Download or read book The Consumption Response to Positive and Negative Income Changes written by Philip Bunn and published by . This book was released on 2017 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Consumption Response to Income Changes written by and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Consumer Demand in the United States written by Lester D. Taylor and published by Springer Science & Business Media. This book was released on 2009-11-25 with total page 530 pages. Available in PDF, EPUB and Kindle. Book excerpt: A classic treatise that defined the field of applied demand analysis, Consumer Demand in the United States: Prices, Income, and Consumption Behavior is now fully updated and expanded for a new generation. Consumption expenditures by households in the United States account for about 70% of America’s GDP. The primary focus in this book is on how households adjust these expenditures in response to changes in price and income. Econometric estimates of price and income elasticities are obtained for an exhaustive array of goods and services using data from surveys conducted by the Bureau of Labor Statistics and aggregate consumption expenditures from the National Income and Product Accounts, providing a better understanding of consumer demand. Practical models for forecasting future price and income elasticities are also demonstrated. Fully revised with over a dozen new chapters and appendices, the book revisits the original Houthakker-Taylor models while examining new material as well, such as the use of quantile regression and the stationarity of consumer preference. It also explores the emerging connection between neuroscience and consumer behavior, integrating the economic literature on demand theory with psychology literature. The most comprehensive treatment of the topic to date, this volume will be an essential resource for any researcher, student or professional economist working on consumer behavior or demand theory, as well as investors and policymakers concerned with the impact of economic fluctuations.

Download or read book Inflation Expectations written by Peter J. N. Sinclair and published by Routledge. This book was released on 2009-12-16 with total page 402 pages. Available in PDF, EPUB and Kindle. Book excerpt: Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. This collection pulls together a galaxy of world experts (including Roy Batchelor, Richard Curtin and Staffan Linden) on inflation expectations to debate different aspects of the issues involved. The main focus of the volume is on likely inflation developments. A number of factors have led practitioners and academic observers of monetary policy to place increasing emphasis recently on inflation expectations. One is the spread of inflation targeting, invented in New Zealand over 15 years ago, but now encompassing many important economies including Brazil, Canada, Israel and Great Britain. Even more significantly, the European Central Bank, the Bank of Japan and the United States Federal Bank are the leading members of another group of monetary institutions all considering or implementing moves in the same direction. A second is the large reduction in actual inflation that has been observed in most countries over the past decade or so. These considerations underscore the critical – and largely underrecognized - importance of inflation expectations. They emphasize the importance of the issues, and the great need for a volume that offers a clear, systematic treatment of them. This book, under the steely editorship of Peter Sinclair, should prove very important for policy makers and monetary economists alike.

Download or read book Heterogeneity and Persistence in Returns to Wealth written by Andreas Fagereng and published by International Monetary Fund. This book was released on 2018-07-27 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide a systematic analysis of the properties of individual returns to wealth using twelve years of population data from Norway’s administrative tax records. We document a number of novel results. First, during our sample period individuals earn markedly different average returns on their financial assets (a standard deviation of 14%) and on their net worth (a standard deviation of 8%). Second, heterogeneity in returns does not arise merely from differences in the allocation of wealth between safe and risky assets: returns are heterogeneous even within asset classes. Third, returns are positively correlated with wealth: moving from the 10th to the 90th percentile of the financial wealth distribution increases the return by 3 percentage points - and by 17 percentage points when the same exercise is performed for the return to net worth. Fourth, wealth returns exhibit substantial persistence over time. We argue that while this persistence partly reflects stable differences in risk exposure and assets scale, it also reflects persistent heterogeneity in sophistication and financial information, as well as entrepreneurial talent. Finally, wealth returns are (mildly) correlated across generations. We discuss the implications of these findings for several strands of the wealth inequality debate.