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Wealth Effects and Consumption in Thailand

Author

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  • Phurichai Rungcharoenkitkul

    (Bank of Thailand)

Abstract

The effects of changes in wealth on consumption in Thailand are estimated, using a cross-sectional household survey conducted in 2010. It is found that consumption, after conditioning for income and household characteristics, is increasing in wealth, whether measured in terms of net worth or gross asset values. The estimated elasticity of consumption with respect to wealth is 0.06, while the estimated income elasticity is 0.60. The corresponding marginal propensity to consume out of wealth is estimated to be around 0.02-0.03. Physical assets, such as housing, matter for consumption more than financial assets, with the elasticity being about five-fold larger. Durable goods consumption is found to be much more sensitive to wealth than consumption of non-durable goods. The paper also discusses evidence that wealth e ects may vary across households, and can be explained by the levels of existing wealth and certain household characteristics.

Suggested Citation

  • Phurichai Rungcharoenkitkul, 2011. "Wealth Effects and Consumption in Thailand," Working Papers 2011-01, Monetary Policy Group, Bank of Thailand.
  • Handle: RePEc:bth:wpaper:2011-01
    as

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    File URL: http://www.bot.or.th/Thai/EconomicConditions/Publication/DiscussionPaper/dp012011_eng.pdf
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    References listed on IDEAS

    as
    1. Christopher D. Carroll, 2001. "A Theory of the Consumption Function, with and without Liquidity Constraints," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 23-45, Summer.
    2. Case Karl E. & Quigley John M. & Shiller Robert J., 2005. "Comparing Wealth Effects: The Stock Market versus the Housing Market," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-34, May.
    3. Orazio P. Attanasio & Laura Blow & Robert Hamilton & Andrew Leicester, 2009. "Booms and Busts: Consumption, House Prices and Expectations," Economica, London School of Economics and Political Science, vol. 76(301), pages 20-50, February.
    4. F. Thomas Juster & Joseph P. Lupton & James P. Smith & Frank Stafford, 2006. "The Decline in Household Saving and the Wealth Effect," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 20-27, February.
    5. Cameron,A. Colin & Trivedi,Pravin K., 2008. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9787111235767, May.
    6. James M. Poterba, 2000. "Stock Market Wealth and Consumption," Journal of Economic Perspectives, American Economic Association, vol. 14(2), pages 99-118, Spring.
    7. A. Colin Cameron & Pravin K. Trivedi, 2010. "Microeconometrics Using Stata, Revised Edition," Stata Press books, StataCorp LP, number musr, December.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    consumption; wealth effects;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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