title: Essays on Household Behavioral Responses to Economic Shocks and Social Constraints
Creators: name: Cabanillas Jiménez, Guillermo
Publisher: name: University of Kent
Year: 2022

description: This PhD thesis intends to extend the economic research in the area of behavioral economics and go deeper in the understanding of individual and household behaviors under different scenarios that an economy or the World can present. More precisely, in the first two chapters we analyze household decisions on consumption allocation of different types of goods under windfall effects. In the third one, we focus on individual decisions in the labor market when specific religious events occur. Going in more detail through all chapters, the first one analyzes how households that live in winning regions of the Spanish Christmas Lottery behave, in terms of consumption of different types of goods, compared with those households that live in non-winning regions of the lottery. Using the winning regions to construct an instrumental variable for total household expenditures, we estimate the Engel curves. The main findings in this chapter are that (i) the estimated total household expenditures elasticities on durable and non-durable goods are similar and, thus, households respond in a similar way to a shock to total household expenditures; and (ii) that the direct impact of the lottery winnings on household consumption of durable and non-durable goods imply a violation of the Permanent Income Hypothesis (PIH). Such findings lead to a contradiction with the theoretical predictions by Cerletti and Pijoan-Mas, 2014. In the second chapter we proceed with a similar study as in the first chapter, where we aim to test, at the household level, how winning the Millions or the £30.000 Postcode Lottery in the United Kingdom affects household consumption behavior. On a first instance, we test the direct effect of the lottery winnings on household consumption of different types of goods. The main finding is that the PIH is violated, as consumption for durable and non-durable goods increase due to the lottery income shock. Later, we estimate the Engel curves, using the same approach as we did in the first chapter. We do find that the estimated elasticity of durable and non-durable goods to total household expenditures are similar, as happens in the first chapter. Therefore, these results lead again to a contradiction of the expected theoretical results, as we should expect non-durable goods to not react sensitively to the income shock. Finally, in the third chapter we analyze individual behavior in the labor market under religious constraints, such as Ramadan, one of the big five pillars of Islam, where individuals that take part of this tradition have to fast for an entire lunar calendar (29-30 days) from sunrise to sunset. Specifically, we test, using a Heckman model with fixed effects, how individuals labor supply is affected under the Ramadan month. Using Malawian data, we find that women do reallocate their time significantly, from paid jobs to housework. On the other hand, we do not find any evidence of time reallocation of hours worked for men. These results prove that during Ramadan, individuals do not work less or decrease their productivity, contrary to the general beliefs. After doing these studies, we find out that human behaviors do not always follow the predicted theories and we do not behave rationally or according to the theory. This is the case we find along this thesis, where classic theories like the Permanent Income Hypothesis are violated.