Estimation of Heterogenous Consumption and Income Parameters
In modern economic literature, much attention is paid to estimates of the structural parameters of consumer choice and the process of income generation. Such estimations play an important role in determining the optimal insurance system, optimal monetary and fiscal policies, as well as in assessing...
| Main Authors: | , |
|---|---|
| Format: | Article |
| Language: | English |
| Published: |
Financial Research Institute
2023-12-01
|
| Series: | Финансовый журнал |
| Subjects: | |
| Online Access: | https://www.finjournal-nifi.ru/images/FILES/Journal/Archive/2023/6/statii/05_6_2023_v15.pdf |
| _version_ | 1827576143880912896 |
|---|---|
| author | Pavel K. Koval Andrey V. Polbin |
| author_facet | Pavel K. Koval Andrey V. Polbin |
| author_sort | Pavel K. Koval |
| collection | DOAJ |
| description | In modern economic literature, much attention is paid to estimates of the structural parameters of consumer choice and the process of income generation. Such estimations play an important role in determining the optimal insurance system, optimal monetary and fiscal policies, as well as in assessing the welfare of the population. In this paper, we estimate a set of parameters that determine the dynamics of household income and consumption in Russia. These parameters are heterogeneous at the household level; the paper uses the estimation method proposed in [Alan et al., 2018]. To estimate the parameters we use RLMS panel data for the period 2005–2019. The results indicate the presence of significant co-dependent heterogeneity of the parameters determining the dynamics of income and consumption. These results reflect the specifics of the consumer behavior of households in Russia. In particular, significant heterogeneity in the sensitivity of consumption to income shocks indicates a large variability of consumption insurance mechanisms available to households. In addition, there is significant heterogeneity in the dispersion of income shocks, which is critical in the context of the discussion of heterogeneous insurance instruments against income shocks (e.g., access to financial assets), as households with higher variation in unanticipated income change value these instruments more. This study is the first to estimate the full distribution of heterogeneous parameters of consumption and income dynamics using Russian data. Estimates of heterogeneous parameters are important for constructing theoretical models of consumer choice and analyzing optimal social policy. In particular, high values of the level of parameter heterogeneity indicate that standard models with a representative agent are not suitable for optimal policy choices. |
| first_indexed | 2024-03-08T21:06:54Z |
| format | Article |
| id | doaj.art-dd3a5bd0ca1f4a02b234b03908d4767d |
| institution | Directory Open Access Journal |
| issn | 2075-1990 2658-5332 |
| language | English |
| last_indexed | 2024-03-08T21:06:54Z |
| publishDate | 2023-12-01 |
| publisher | Financial Research Institute |
| record_format | Article |
| series | Финансовый журнал |
| spelling | doaj.art-dd3a5bd0ca1f4a02b234b03908d4767d2023-12-22T12:51:18ZengFinancial Research InstituteФинансовый журнал2075-19902658-53322023-12-01156769210.31107/2075-1990-2023-6-76-92Estimation of Heterogenous Consumption and Income ParametersPavel K. Koval0https://orcid.org/0000-0002-7461-094XAndrey V. Polbin1https://orcid.org/0000-0003-4683-8194Gaidar Institute, Moscow, Russian FederationGaidar Institute, Moscow, Russian Federation; RANEPA, Moscow, Russian FederationIn modern economic literature, much attention is paid to estimates of the structural parameters of consumer choice and the process of income generation. Such estimations play an important role in determining the optimal insurance system, optimal monetary and fiscal policies, as well as in assessing the welfare of the population. In this paper, we estimate a set of parameters that determine the dynamics of household income and consumption in Russia. These parameters are heterogeneous at the household level; the paper uses the estimation method proposed in [Alan et al., 2018]. To estimate the parameters we use RLMS panel data for the period 2005–2019. The results indicate the presence of significant co-dependent heterogeneity of the parameters determining the dynamics of income and consumption. These results reflect the specifics of the consumer behavior of households in Russia. In particular, significant heterogeneity in the sensitivity of consumption to income shocks indicates a large variability of consumption insurance mechanisms available to households. In addition, there is significant heterogeneity in the dispersion of income shocks, which is critical in the context of the discussion of heterogeneous insurance instruments against income shocks (e.g., access to financial assets), as households with higher variation in unanticipated income change value these instruments more. This study is the first to estimate the full distribution of heterogeneous parameters of consumption and income dynamics using Russian data. Estimates of heterogeneous parameters are important for constructing theoretical models of consumer choice and analyzing optimal social policy. In particular, high values of the level of parameter heterogeneity indicate that standard models with a representative agent are not suitable for optimal policy choices.https://www.finjournal-nifi.ru/images/FILES/Journal/Archive/2023/6/statii/05_6_2023_v15.pdfheterogenous parametersconsumptionincomehouseholdsrlmsstructural model |
| spellingShingle | Pavel K. Koval Andrey V. Polbin Estimation of Heterogenous Consumption and Income Parameters Финансовый журнал heterogenous parameters consumption income households rlms structural model |
| title | Estimation of Heterogenous Consumption and Income Parameters |
| title_full | Estimation of Heterogenous Consumption and Income Parameters |
| title_fullStr | Estimation of Heterogenous Consumption and Income Parameters |
| title_full_unstemmed | Estimation of Heterogenous Consumption and Income Parameters |
| title_short | Estimation of Heterogenous Consumption and Income Parameters |
| title_sort | estimation of heterogenous consumption and income parameters |
| topic | heterogenous parameters consumption income households rlms structural model |
| url | https://www.finjournal-nifi.ru/images/FILES/Journal/Archive/2023/6/statii/05_6_2023_v15.pdf |
| work_keys_str_mv | AT pavelkkoval estimationofheterogenousconsumptionandincomeparameters AT andreyvpolbin estimationofheterogenousconsumptionandincomeparameters |