Consumption and saving behaviour: modelling recent trends

This paper illustrates recent trends in household consumption and personal savings in the UK and the US and discusses some theoretical models that can be used to interpret them. The trends in these two countries are interesting for several reasons. The decline in personal saving rates in the US during the 1980s is an unresolved puzzle. The corresponding variable in the UK has undergone large fluctuations, as have several other variables ranging from projected demographic trends to female labour supply. This paper stresses the need to analyse individual data to shed some light on these aggregate trends. It also stresses the need to have a sound structural model to interpret observed patterns in the data. The theoretical framework discussed throughout the paper is the life-cycle model, which views consumption and saving decisions as part of a dynamic optimisation process. The development of the model and the current research agenda and ways that it can be enriched with various degrees of sophistication are discussed. Particular attention is devoted to the discussion of the most recent developments.

The appraisal of buildable land for property taxation in the adopted general municipal plan

In Italy, tax base for "Imposta Municipale Unica" related to the building area -made such by General Plan or its General Variation adopted but not approved - is the value (of the same building area) depending on the building potential of prediction even if not immediately exercisable. However, the building rights can be exercised only after: (i) the final approval of the General Plan/General Variation; (ii) the approval of the Implementation Plan required by Law; (iii) the issuance of certificates of permission building. This has produced in recent years several disputes between owners and local governments; the law did not give univocal solutions: today (2015) there is a conflict of case law relating to consider this areas absolutely as building areas, as well as it isn't defined what estimating procedures should be used. In this paper, through the application of a model of financial mathematics, an approach that overcomes the conflict law related to the appraisal of the building areas included inGeneral Plans/General Variation adopted but not yet approved, is proposed: the appraisal will be performed in relation to the time and variables between the time of the appraisal and the time (alleged) for the completion of the administrative procedure for obtaining authorizations to build

Estimation of continuous-time interest rate models: a nonparametric approach

This paper presents a general, nonlinear model for term structure interest rate. The approach is the same of Stanton (1997) but it has been extended to a multifactor model. The novel aspect is that rather than choosing the functional specification of the model, the process is generated from the data using approximation methods for multifactor continuous-time Markov processes. In applying this technique to the short and long end of the term structure for a general two-factor diffusion process for interest rates is possible to find some interesting nonlinearity in the interest rate data that are not considered in almost all parametric specifications of term structure interest rate model of the financial literature.continuous-time models, nonparametric estimation, multi-factor interest rate model

Oportunidades: Program Effect on Consumption, Low Participation, and Methodological Issues

In this paper we estimate the effect of the Mexican conditional cash transfer program, Oportunidades, on consumption, and we explore some issues related to participation to the program and to the estimation of treatment effects. We discuss the comparability of treatment and control areas, provide evidence that the expected transfer may not be sufficiently high to induce many eligible households to participate, and find positive effects on consumption.program evaluation, consumption, matching, Oportunidades

Risk Sharing in Private Information Models with Asset Accumulation: Explaining the Excess Smoothness of Consumption

We derive testable implications of model in which first best allocations are not achieved because of a moral hazard problem with hidden saving. We show that in this environment agents typically achieve more insurance than that obtained under autarchy via saving, and that consumption allocation gives rise to 'excess smoothness of consumption', as found and defined by Campbell and Deaton (1987). We argue that the evidence on excess smoothness is consistent with a violation of the simple intertemporal budget constraint considered in a Bewley economy (with a single asset) and use techniques proposed by Hansen et al. (1991) to test the intertemporal budget constraint. We also construct closed form examples where the excess smoothness parameter has a structural interpretation in terms of the severity of the moral hazard problem. Evidence from the UK on the dynamic properties of consumption and income in micro data is consistent with the implications of the model.

Stochastic Components of Individual Consumption: A Time Series Analysis of Grouped Data

In this paper we propose a method to characterize the time series properties of individual consumption, income and interest rates using micro data, as studies in labour economics have characterized the time series properties of hours and earnings. Our approach, however, does not remove aggregate shocks. Having estimated the parameters of a flexible multivariate MA representation we relate the coefficients of our statistical model to structural parameters of theoretical models of consumption behaviour. Our approach offers a unifying framework that encompasses the Euler equation approach to the study of consumption and the studies that relate innovations to income to innovations to consumption, such as those that have found the so-called excess smoothness of consumption. Using a long time series of cross sections to construct synthetic panel data for the UK, we estimate our model and find that the restriction of Euler equations are typically not rejected, while the data show ‘excess smoothness’.

Is Consumption Growth Consistent with Intertemporal Optimization? Evidence from the Consumer Expenditure Survey

In this paper we show that some of the predictions of models of consumer intertemporal optimization are not inconsistent with the patterns of non-durable expenditure observed in US household-level data. Our results and our approach are new in several respects. First, we use the only US micro data set which has direct and complete information on household consumption. The microeconomic data sets used in most of the consumption literature so far contained either very limited information on consumption (like the PSID) or none at all, in which case consumption had to be obtained indirectly from income and changes in assets. Second, we propose a flexible and novel specification of preferences which is easily estimable and allows a general treatment jof multiple commodities. We show that aggregation over commodities can be important, both theoretically and in practice. Third, we present empirical results that show that it is possible to find a reasonably simple specification of preferences, which controls for the effects of changes in demographics and labor supply behavior over the life cycle and which is not rejected by the available data. On our preferred specification, we obtain sharp estimates of key behavioral parameters (including the elasticity of intertemporal substitution) and no rejections of theoretical restrictions. Our results contrast sharply with most of the previous evidence, which has typically been interpreted as rejection of the theory. We show that previous rejections can be explained by the simplifying assumptions made to derive empirically tractable equations. We also show that results obtained using food consumption or aggregate data can be extremely misleading.

Sacudidas salariales y variabilidad del consumo en México durante los años 90

(Disponible en idioma inglés únicamente) En este trabajo se presentan elementos de juicio sobre la relación entre las sacudidas económicas y el salario relativo de los varones y los cambios de consumo de los hogares en México durante los años 90, un período caracterizado por una inestabilidad elevada. Además de realizar esta clase de análisis con México por primera vez, el trabajo presenta dos aportes principales. El primero es el uso de fuentes alternativas de datos para construir variables instrumentales de salarios. El segundo es analizar las diferencias entre cuatro categorías de consumo: bienes perecederos, bienes no perecederos, educación y salud. Nuestros resultados en cuanto al consumo de bienes perecederos rechazan la hipótesis de que los hogares mexicanos son capaces de asegurarse contra el riesgo idiosincrásico. En cuanto a las comparaciones entre categorías de consumo, la conclusión es que en México los hogares tienden a reaccionar a sacudidas pasajeras contrayendo el consumo de bienes que representan inversiones de más largo plazo en el capital humano, lo que los hace más vulnerables en el futuro.