a multivariate sample selection model estimating cigarette and alcohol demands with zero observations heckman s sample selection model is generalized to the multivariate case and used to estimate demands for cigarettes beer and wine by individuals in the united states the specification allows correlations between the error terms of multiple selection and level equations and nests the popular bivariate sample selection model and two part model empirical results suggest that the proposed model performs better than the restricted specifications differentiated effects of variables on probabilities and levels of consumption also suggest rejection of the tobit system gender differences are present and demographic variables are more important than income in determining consumption of cigarettes beer and wine

demand elasticities for food products in brazil a two stage budgeting system the object of this article is to estimate demand elasticities for a basket of staple food important for providing the caloric needs of brazilian households these elasticities are useful in the measurement of the impact of structural reforms on poverty a two stage demand system was constructed based on data from household expenditure surveys pof produced by ibge the brazilian bureau of statistics in 1987 88 and 1995 96 we have used panel data to estimate the model and have calculated income own price and cross price elasticities for eight groups of goods and services and in the second stage for 11 sub groups of staple food products we estimated those elasticities for the whole sample of consumers and for two income groups

the impact of house prices on consumption in the uk a new perspective this paper proposes an alternative approach to the question of how house prices influence household consumption by focusing on their impact on mortgage equity withdrawal and household saving household level data are used to derive a measure of expected and unexpected changes in house prices these are then incorporated into a recursive bivariate probit model of the decision to withdraw housing equity and save the results suggest that households respond to changes in their housing wealth primarily by increasing their mortgage borrowing rather than by decreasing their savings although this is mainly for younger households however while changes in housing wealth do not have a direct impact on household saving they do have an important indirect impact since they increase the likelihood that the household will withdraw equity which in turn has a negative impact on household saving

bayesian estimation of a censored linear almost ideal demand system food demand in pakistan a censored linear almost ideal demand system for food is estimated with a bayesian markov chain monte carlo procedure using a sample of urban households from pakistan all own price elasticities but one are found to be negative and all total food expenditure elasticities are found to be positive with a high posterior probability there is a mix of gross complements and substitutes among the food products while net substitution is the predominant pattern household characteristics play a role in food expenditures and regional differences exist these demand elasticities can inform policy deliberations by the national government and international organizations welfare policy and market analyses require estimation of a complete system of demand equations often from household survey data unlike aggregate time series which are often not conducive to precise estimation of crossprice effects due largely to collinearity of prices cross sectional data offer an important advantage in deriving better elasticity estimates detailed demographic characteristics collected in cross sectional surveys allow accommodation of heterogeneous preferences and the typically large sample also provides the degrees of freedom to estimate a large and disaggregate demand system the use of microdata however is often complicated by censoring in the dependent variables this censored data feature most notable in demand estimation at the disaggregate level needs to be accommodated in order to obtain consistent parameter and elasticity estimates deaton 1986 p 1809 noted that the issue of zero observations is one of the most pressing panagiotis kasteridis is postdoctoral research associate and steven t yen is a professor at the university of tennessee cheng fang is an economist at the global information and early warning service food and agriculture organization fao of the united nations research was supported in part by usda s cooperative agreements nos 58 5000 7 0123 and 43 3aem 2 80063 the authors benefited from constructive comments by two anonymous reviewers and a blueprint for the monte carlo simulation by editor jeffrey h dorfman the article reflects the views of the authors not necessarily those of the usda or fao or its member

the italian recession of 1993 aggregate implications of microeconomic evidence we use household level data covering a ten year period 1984 to 1993 to investigate the likely determinants of the italian recession of 1993 the first year after wwii when private consumption fell consumption fell most for working age households and for the self employed our evidence is consistent with the response to permanent negative shocks due to the major pension reform of 1992 and the introduction of stricter tax compliance measures for the self employed this is still true when we control for the role played by job losses and the collapse of the retail sector that characterized the early 1990s

using subjective income expectations to test for excess sensitivity of consumption to predicted income growth abstract we test for precautionary saving and excess sensitivity of consumption to predicted income growth using a 1989 1993 panel survey of italian households that has measures of subjective income and inflation expectations these expectations provide a powerful instrument for predicting income growth the empirical specification controls for predictable changes in labor supply and allows a fairly general specification for the stochastic structure of the forecast error we find that consumption growth is positively correlated with the expected variance of income and uncorrelated with predicted income growth overall the results support the precautionary saving model

were nineteenth century industrial workers permanent income savers theories of household saving posit that households add to or draw down wealth to equalize the discounted present value of consumption over time this article examines the extent to which 19th century urban american industrial workers saved and dissaved to smooth consumption in response to unanticipated plausibly exogenous shocks to income information on the expected and unexpected number of days unemployed is used to construct estimates of transitory income the data are then used to estimate the marginal propensity to save from transitory income the results are broadly consistent with friedman s 1957 permanent income hypothesis in that the marginal propensity to consume from transitory income is about twice that of nontransitory income

what do we learn from recall consumption data in this paper we use two complementary italian data sources the 1995 istat and bank of italy household surveys to generate householdspecific nondurable expenditure in the bank of italy sample that contains relatively high quality income data we show that food expenditure data are of comparable quality and informational content across the two surveys once we properly account for heaping rounding and time averaging we therefore depart from standard practice and rely on the estimation of an inverse engel curve on istat data to impute nondurable expenditure to bank of italy observations and show how we can use these estimates to analyze consumption age profiles conditional on demographics our key result is that predictions based on a standard set of demographic and socioeconomic indicators are quite different from predictions that also condition on simulated food consumption in the sense that their age profile is less in line with the implications of the standard consumer intertemporal optimization problem

disaggregated household meat demand with censored data previous research on meat demand has generally used highly aggregated data across time products and consumers however meat products across species are likely stronger substitutes than some products from the same species further demand for specific meat products would be expected to respond differently to market information about food safety or other events this study uses monthly consumer panel data collected between 1992 and 2000 to estimate a disaggregated meat product demand system the use of the expectations maximization algorithm is introduced to estimate a demand system that adjusts for the econometric problem of censored data resulting from purchased shares of some products by individuals often being equal to zero results indicate that certain individual meat products have noticeably different own price elasticities than existing aggregate meat product estimates of their respective species some individual meat products have stronger substitutes across species than within species e g be

saving and liquidity constraints this paper is concerned with the theory of saving when consumers are not permitted to borrow and with the ability of such a theory to account for some of the stylized facts of saving behavior the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life cycle models copyright 1991 by the econometric society

saving and income smoothing evidence from panel data abstract in this paper we use data from a panel of dutch households to investigate the behavior of savings as in campbell 1987 we examine whether the pattern of savings is consistent with the predictions of the rational expectations permanent income model we consider one important prediction of the model whether savings anticipate future income changes we test the predictions of the permanent income model in several ways first we propose some informal tests that exploit directly the information on expected future income changes available in the data we then perform a test of the model by setting up a vector autoregression var in terms of savings and income changes and by using euler equations expressed in terms of savings the empirical evidence shows that in all the specifications used in this paper the permanent income model is rejected contrary to the evidence from u s macro data we do not find that the excess sensitivity of consumption to income is responsible for the rejection of the model

correlated income shocks and excess smoothness of consumption abstract in the literature econometricians typically assume that household income is the sum of a random walk permanent component and a transitory component with uncorrelated permanent and transitory shocks using data on realized individual incomes and individual expectations of future incomes from the survey of italian households income and wealth i find that permanent and transitory shocks are negatively correlated relaxing the assumption of no correlation between the shocks i explore the effects of correlated income shocks on the estimated consumption insurance against permanent and transitory shocks and consumption smoothness using a life cycle model with self insurance calibrated to u s data negatively correlated income shocks result in smoother consumption and upward biased estimates of the insurance against transitory and permanent when borrowing constraints are not tight income shocks while the life cycle model with negatively correlated shocks fits well the sensitivity of consumption to current income shocks observed in u s data it falls short of explaining the sensitivity of consumption to income shocks cumulated over a longer horizon

knowledge of future job loss and implications for unemployment insurance this paper studies the implications of individuals knowledge of future job loss for the existence of an unemployment insurance ui market learning about job loss leads to consumption decreases and spousal labor supply increases this suggests existing willingness to pay estimates for ui understate its value but it yields new estimation methodologies that account for and exploit responses to learning about future job loss although the new willingness to pay estimates exceed previous estimates i estimate much larger frictions imposed by private information this suggests privately traded ui policies would be too adversely selected to be profitable at any price

household food demand in turkey a two step demand system approach abstract demands for sixteen food products are investigated using data from the turkish household expenditure survey the linear approximate almost ideal demand system laids is estimated with shonkwiler and yen s two step procedure all own price elasticities are negative and expenditure elasticities positive bread other cereals bovine mutton giblets and cheese have high expenditure elasticities mutton bovine and several other protein rich products are price elastic results suggest a mix of gross substitutes and complements while net substitution is the dominant pattern demographic characteristics also play important roles in shaping food demand the elasticity estimates can inform policy deliberations

insurance within the firm we evaluate the allocation of risk between firms and their workers using matched employer employee panel data unlike previous contributions this paper focuses on idiosyncratic shocks to the firm which are the correct empirical counterpart of the theoretical notion of diversifiable risk we allow for both temporary and permanent shocks to output and find that firms absorb temporary fluctuations fully but insure workers against permanent shocks only partially risk sharing considerations can account for about 15 percent of overall earnings variability the remainder originating from idiosyncratic shocks to individual workers our welfare calculations indicate that firms are an important vehicle of insurance provision

demand for meat and dairy products by turkish households a bayesian censored system approach we extend the tobit censored linear equation system procedure to utility theoretic demand functions along with a mapping mechanism to impose the adding up restriction implied by consumer utility maximization theory a theoretical restriction very often ignored in previous empirical studies with censored demand systems in this context the bayesian markov chain monte carlo mcmc procedure is applied to the censored linear approximate almost ideal demand system laids for 12 food products using data from the turkish household expenditure survey all own price elasticities are negative and expenditure elasticities positive uncompensated own price elasticities for rural households are generally much higher than those for their urban peers though demand for most food products are own price elastic for both types of households the differential patterns in demand elasticities between urban and rural households become even more evident almost twice as relatively more expensive foodstuffs are consumed showing that accessibilities to alternative products have made rural turkish households more cognizant toward price changes in foods household characteristics play a key role in food expenditures notably so in urban areas and regional and seasonal differences are also present

household optimism and overborrowing we use finnish household level data from 1994 to 2013 to measure how often and what kind of forecast errors households make and how the errors are linked to the households borrowing behavior and overindebtedness we find that those households that make the largest optimistic forecast errors have greater debt to income ratios they also are more likely to report that they suffer from excessive debt loads and have problems in coping with their bills there are no such systematic effects for the households that make pessimistic forecast errors

consumption inequality and income uncertainty this paper places the debate over using consumption or income in studies of inequality growth in a formal intertemporal setting it highlights the importance of permanent and transitory income uncertainty in the evaluation of growth in consumption inequality we derive conditions under which the growth of variances and covariances of income and consumption can be used to separately identify the growth in the variance of permanent and transitory income shocks household data from britain for the period 1968 1992 are used to show a strong growth in transitory inequality toward the end of this period while younger cohorts are shown to face significantly higher levels of permanent inequality

wealth shocks unemployment shocks and consumption in the wake of the great recession we use data from the 2009 internet survey of the health and retirement study to examine the consumption impact of wealth shocks and unemployment during the great recession in the us we find that many households experienced large capital losses in housing and in their financial portfolios and that a non trivial fraction of respondents have lost their job as a consequence of these shocks many households reduced substantially their expenditures we estimate that the marginal propensities to consume with respect to housing and financial wealth are 1 and 3 3 percentage points respectively in addition those who became unemployed reduced spending by 10 percent we also distinguish the effect of perceived transitory and permanent wealth shocks splitting the sample between households who think that the stock market is likely to recover in a year s time and those who don t in line with the predictions of standard models of intertemporal choice we find that the latter group adjusted much more than the former its spending in response to financial wealth shocks

anticipated and unanticipated wage changes wage risk and intertemporal labor supply in this article i estimate how labor supply responds to anticipated wage growth unanticipated wage growth and wage risk using the 1989 93 panel section of the bank of italy survey of households income and wealth shiw which collects individual expectations of future wages the use of subjective expectations has several advantages first they provide information on the evolution and riskiness of future wages that the econometrician may never hope to observe moreover this avoids the need for specifying instruments for the growth rate of wages finally forecast errors can be directly controlled for thus avoiding inconsistency in short panels

earnings uncertainty and precautionary saving abstract we test for the presence of precautionary saving using a self reported measure of earnings uncertainty drawn from the 1989 italian survey of household income and wealth the effect of uncertainty on wealth accumulation is consistent with the theory of precautionary saving and with decreasing prudence but explains only a small fraction of saving the results cast doubts on the empirical relevance of precautionary saving in response to earnings uncertainty but are not in contrast with the importance of the precautionary motive per se beside earnings uncertainty other risks such as health and mortality may be important determinants of wealth accumulation

expectations and perceptions in developing countries their measurement and their use in recent years much attention has been devoted to the debate between two groups of applied researchers the first stresses the need for empirical work to rely on variation in the data that is truly and surely exogenous to estimate a well defined if narrow set of parameters the second is willing to impose structure on data to estimate behavioral parameters the conduct and design of economic policy rely heavily on the identification of structural behavioral parameters as they are crucial to understanding how individuals react to incentives in different contexts however the estimation of structural models often relies on very strong assumptions the availability of rich datasets that include credible measurements of variables that are relevant to the decision making process such as expectations perceptions and beliefs can shift the weight of this debate as it allows the estimation of structural models of individual behavior using much weaker assumptions moreover in the case of development measurement of this type of variables goes straight to the core of issues that are fundamental for the understanding of the causes of the lack of development and the imperfections in markets knowledge and information that may prevent growth the availability of hard data on expected returns on certain investments and how individuals act upon these expectations gives direct information on whether individuals have reasonable beliefs on returns and crucially on whether credit and insurance market imperfections might be playing an data watch data initiatives

wage risk and employment risk over the life cycle we specify a structural life cycle model of consumption labour supply and job mobility in an economy with search frictions that allows us to distinguish between different sources of risk and to estimate their effects the sources of risk are shocks to productivity job destruction the process of job arrival when employed and unemployed and match level heterogeneity our model allows for four main social insurance programmes in contrast to simpler models that attribute all income fluctuations to shocks our framework allows us to disentangle the effects of the shocks from the responses to these shocks estimates of productivity risk once we control for employment risk and for individual labour supply choices are substantially lower than estimates that attribute all wage variation to productivity risk increases in productivity risk impose a considerable welfare loss on individuals and induce substantial precautionary saving increases in employment risk have large effects on output and primarily through this channel affect welfare the welfare value of government programs such as food stamps which partially insure productivity risk is greater than the value of unemployment insurance which provides partial insurance against employment risk and no insurance against persistent shocks

using weather variability to estimate the response of savings to transitory income in thailand this paper measures the extent to which farmers are able to use savings and dissavings to smooth consumption in response to unexpected shocks to income time series information on regional rainfall is used to construct estimates of transitory income due to rainfall shocks the relationship between these measures of transitory income and savings indicates that farm households save a significantly higher fraction of transitory income than nontransitory income jel d91 016 the incomes of farm households in developing countries are notorious for being both low and uncertain policies that increase the incomes of farmers may well be different

estimating food demand in paraguay from household survey data we estimate a food demand system in paraguay based on the 1997 national household survey considering 12 food categories to obtain demand elasticity estimates from household survey data accounting for quality effects measurement errors and censored observations price indexes are obtained from ordinary least squares predictions of changes in unitary values caused by spatial and temporal variations and the two step estimation procedure shonkwiler and yen 1999 is applied our approach yields reasonable estimates of combined quantity and quality responses with respect to price results suggest distinct consumption behavior in urban and rural areas particularly for chicken eggs dairy and fats and oils which are likely because of differences in the food distribution system and availability of nonmarket food sources

choice inconsistencies among the elderly evidence from plan choice in the medicare part d program we evaluate the choices of elders across their insurance options under the medicare part d prescription drug plan using a unique data set of prescription drug claims matched to information on the characteristics of choice sets we document that elders place much more weight on plan premiums than on expected out of pocket costs value plan financial characteristics beyond any impacts on their own financial expenses or risk and place almost no value on variance reducing aspects of plans partial equilibrium welfare analysis implies that welfare would have been 27 higher if patients had all chosen rationally

the excess smoothness of consumption identification and interpretation deaton s observation that consumption appears to be too smooth is easily reconciled with the notion that consumption exhibits excess sensitivity to current income the reconciliation invokes the plausible assumption that households forecast on the basis of a larger information set than the econometrician the empirical case for excess smoothness is strengthened by showing that the innovations in permanent income can be inferred from an autoregression of income and saving not only under the permanent income hypothesis but also under the excess sensitivity model empirically parameter restrictions imposed on the bivariate autoregression by the excess sensitivity model are not rejected

inflation dynamics and subjective expectations in the united states i introduction this paper analyzes the ability of sticky price models to explain the dynamics of u s inflation when using survey data as proxies for inflation expectations testing sticky price models with survey expectations is attractive since to the extent that survey data correctly capture agents expectations they allow to disregard issues related to the specification of agents expectations functions one neither has to impose untested orthogonality restrictions as required when estimating under the assumption of rational expectations nor has to make restrictive assumptions about the precise form of nonrationality present in agents forecast functions this allows to focus on the question whether the economic models under consideration are correctly specified previous tests of sticky price models performed under the assumption that agents hold rational expectations have generated mixed results prominently fuhrer and moore 1995 have reported that sticky price models do not generate sufficient stickiness for inflation when the output gap is used as a measure of real marginal costs recent evidence however has shown that the empirical performance depends crucially on how one measures real marginal costs the main determinant of inflation according to sticky price models for instance gall and gertler 1999 and sbordone 2002 show that sticky price models perform well once marginal costs are approximated by average unit labor costs 1 it makes an important difference whether sticky price models successfully explain inflation dynamics as a function of output behavior or they relate inflation dynamics to the behavior of unit labor costs given that the ultimate objective is a model explaining the joint behavior of output and inflation the latter case would require an additional empirically plausible theory linking the dynamics of unit labor costs to the behavior of output this paper studies whether the currently popular new keynesian phillips curve nkpc which can be derived from calvo 1983 style sticky price models is able to explain a relationship between inflation on the one hand and output or unit labor costs on the other hand thus we let the data speak whether a theory linking output to costs is warranted once expectations are approximated by data reported in the survey of professional forecasters our main finding is that the nkpc performs equally well with both measures of marginal costs output and unit labor costs whatever measure is used the estimate of the quarterly discount factor is close to one and the point estimate of the degree of price stickiness implies that firms reset their prices roughly every five quarters on average these results suggest that potential nonrationalities in expectations as they show up in surveys have biased previous estimates using output as a measure for marginal costs quite surprisingly the same nonrationalities do not seem to play a role when using unit labor costs here our estimates confirm the results obtained by gall and gertler 1999 and sbordone 2002 who assumed rational expectations we show that the reason for this finding is that approximating the agents information set using the unit labor cost variable rests on more solid grounds than approximating it using the output variable in particular the survey data suggest that the hypothesis of rational expectations implies a too high correlation between lagged output and future inflation expectations we show that this causes the coefficient estimate for output to become negative contrary to what is implied by theory these results suggest that once one takes account of potentially nonrational expectations via survey expectations sticky price models are able to establish a close link between output dynamics and the behavior of inflation to assess the robustness of this finding we include into the price equation lags of various variables and test for their significance

superior information income shocks and the permanent income hypothesis according to the permanent income hypothesis with quadratic preferences households save for a rainy day the transitory component of income innovations and consume entirely the permanent one the m

can consumers distinguish persistent from transitory income shocks we study whether households can distinguish persistent from transitory income shocks and the implications for consumption saving behavior we construct a novel consumption saving model where the household must infer the persistent component of its income process from actual income realizations together with an additional noisy private signal we first show that the degree of imperfect information has important consequences for the interpretation of transmission parameters to persistent and transitory income shocks a large transitory transmission parameter can e g be estimated despite of a low marginal propensity to consume because the short run covariance between income growth and consumption growth increases when households cannot distinguish persistent from transitory income shocks we further show that the householdsi degree of knowledge can be identified from panel data on income and consumption finally we estimate a high degree of knowledge in the panel study of income dynamics