BIROn - Birkbeck Institutional Research Online

    Puzzles in household finance and consumption: theory and evidence from the PSID

    Molesworth St Aubyn, Carolyn (2022) Puzzles in household finance and consumption: theory and evidence from the PSID. PhD thesis, Birkbeck, University of London.

    [img]
    Preview
    Text
    StAubynFinal.pdf - Full Version

    Download (4MB) | Preview

    Abstract

    This thesis consists of five chapters. The first studies the well documented credit card debt, or co-holding, puzzle; consumers who simultaneously hold credit card debt and liquid assets. It finds that co-holders can be separated into two groups; those with liquid assets close to the level of credit card debt, and those with high levels of liquid assets relative to credit card debt. While existing theories focus on liquidity based arguments, I suggest that a different explanation is needed for the liquid group’s co-holding. Next, I develop a theoretical model to explain this co-holding. The crucial assumption of the model is that consumers have preferences for money (interchangeable with wealth) as well as for consumption. This means consumers dislike parting with money, or equivalently, making payments. The main results are: 1) both money and a consumption are chosen optimally if the budget is sufficient, 2) when payment is delayed, the consumer chooses to consume more, when consumption is delayed, the consumer chooses to consume less. The model has implications for other economic puzzles such as the credit card premium, for example. The third chapter studies habits in consumption. It tests whether consumption is influenced by the consumption of the next highest income group and finds a positive coefficient. The forth chapter studies consumption over the lifecycle. Two modifications are made to the standard estimation approach; we allow consumption by age to vary over time and we control for household level fixed effects. Both have an impact on lifecycle consumption. Consumption profiles have consistently become flatter over time, that is intergenerational differences in consumption across age groups have decreased overtime. The final chapter describes the construction of the data set used for the empirical chapters. This includes a multiple imputation of non durable consumption going back to1968.

    Metadata

    Item Type: Thesis
    Copyright Holders: The copyright of this thesis rests with the author, who asserts his/her right to be known as such according to the Copyright Designs and Patents Act 1988. No dealing with the thesis contrary to the copyright or moral rights of the author is permitted.
    Depositing User: Acquisitions And Metadata
    Date Deposited: 08 Mar 2022 17:28
    Last Modified: 08 Mar 2022 17:28
    URI: https://eprints.bbk.ac.uk/id/eprint/47727

    Statistics

    Activity Overview
    6 month trend
    53Downloads
    6 month trend
    64Hits

    Additional statistics are available via IRStats2.

    Archive Staff Only (login required)

    Edit/View Item Edit/View Item