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Habit Formation And Precautionary Saving: Evidence From The Korean Household Panel Studies

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  • Wooheon Rhee

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    (Department of Economics, Kyunghee University)

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    Abstract

    We examined the evidence of precautionary saving and Constantinides (1990) type habit formation model by using the Korean Household Panel Studies, which has six years of time series observations and thousands of cross section observations. Employing the dynamic panel data estimation method, we found that the estimates of parameters corresponding to the degree of habit formation and precautionary saving are statistically insignificant for food consumption, but statistically significant or at least marginally significant for nondurables and services consumption.

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    File URL: http://www.jed.or.kr/full-text/29-2/Wooheon.pdf
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    Bibliographic Info

    Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

    Volume (Year): 29 (2004)
    Issue (Month): 2 (December)
    Pages: 1-19

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    Handle: RePEc:jed:journl:v:29:y:2004:i:2:p:1-19

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    Related research

    Keywords: Habit Formation; Precautionary Saving; Korean Household Panel Studies; Dynamic Panel Data Estimation;

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    References

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    1. Abel, Andrew B, 1990. "Asset Prices under Habit Formation and Catching Up with the Joneses," American Economic Review, American Economic Association, vol. 80(2), pages 38-42, May.
    2. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
    3. David J. McKenzie, 2001. "Consumption Growth in a Booming Economy: Taiwan 1976-96," Working Papers 823, Economic Growth Center, Yale University.
    4. Karen E. Dynan, 2000. "Habit Formation in Consumer Preferences: Evidence from Panel Data," American Economic Review, American Economic Association, vol. 90(3), pages 391-406, June.
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    Cited by:
    1. Terada-Hagiwara, Akiko, 2009. "Explaining Filipino Households’ Declining Saving Rate," ADB Economics Working Paper Series 178, Asian Development Bank.
    2. Marcos Chamon & Eswar Prasad, 2008. "Why are Saving Rates of Urban Households in China Rising?," NBER Working Papers 14546, National Bureau of Economic Research, Inc.

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