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

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  • Wooheon Rhee

    () (Department of Economics, Kyunghee University)

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.

Suggested Citation

  • Wooheon Rhee, 2004. "Habit Formation And Precautionary Saving: Evidence From The Korean Household Panel Studies," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 29(2), pages 1-19, December.
  • Handle: RePEc:jed:journl:v:29:y:2004:i:2:p:1-19
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    References listed on IDEAS

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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, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, pages 115-143.
    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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    Citations

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    Cited by:

    1. Marcos D. Chamon & Eswar S. Prasad, 2010. "Why Are Saving Rates of Urban Households in China Rising?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 93-130, January.
    2. Ken Chamuva Shawa, 2016. "Drivers Of Private Saving In Sub-Saharan African Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 41(2), pages 77-110, June.
    3. Terada-Hagiwara, Akiko, 2009. "Explaining Filipino Households’ Declining Saving Rate," ADB Economics Working Paper Series 178, Asian Development Bank.

    More about this item

    Keywords

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

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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