Essays on households' consumption and saving decisions.
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In this thesis I contribute to the applied study of households' consumption and saving behaviour. In the first chapter I introduce and explain
why it is relevant to understand how households react to income shocks in
terms of their consumption and saving decisions.
The second chapter is inspired by a recent paper by Krueger and Perri
(2011), who argue that the observed response of household wealth to income
shocks, which is smaller over long periods, provides evidence in favour of the
classic permanent-income model with perfect financial markets. Whether a
model with financial market imperfections, however, such as the standard
incomplete-markets model with liquidity constraints, can also generate such
a wealth response crucially depends on the importance of precautionary
wealth accumulation. I structurally estimate a model with a precautionary-
savings motive and show that it can generate the observed wealth responses
in the data. I further show that the wealth responses to income shocks do
not allow us to rule out financial market imperfections.
In the third chapter I extend the analysis, studying empirically what
can be learned from international evidence on the way in which households
react to income. I use detailed panel data from newly available surveys of
Chile, Spain and the United States. Although it compares three different
countries with dissimilar levels of development in their financial markets,
the evidence suggests that the amount of precautionary savings in these
economies is low and that household behaviour is not strongly influenced
by the presence of borrowing constraints. The structural estimation for all
countries suggests a low target level of wealth resulting from high levels of
impatience or low levels of risk aversion.
In the fourth chapter I extend the analysis to the real estate properties owned by the households. I revisit the Italian data, building on
Kaplan and Violante (2014) who have argued that a substantial fraction
of wealthy households with illiquid wealth, such as real estate, behave as
hand-to-mouth consumers. In exploring the data, I find that, in the Italian
sample, households which adjust their illiquid wealth show responses to income shocks like permanent-income consumers. Instead households which
do not adjust their illiquid wealth, and whose behaviour in general can
thus not be characterised by the first order conditions, show responses to
income shocks which suggest a stronger precautionary-saving motive, such
as wealthy hand-to-mouth consumers might be expected to show.
The fifth chapter provides the conclusions of the thesis.
Authors
Frache Derregibus, SerafinCollections
- Theses [3833]