Consumption and saving under liquidity constraints: The Philippine case, 1988-2000

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ID: 285850
2004
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Abstract
This thesis explores the consumption-saving behavior of Filipino households under liquidity constraints. It raises the following questions: Is the consumption and saving behavior of Filipino households consistent with the predictions of Permanent Income Life Cycle Hypothesis (PILCH)? Are Filipino households liquidity-constrained (i.e., unable to draw on savings in illiquid assets or future incomes to finance current expenditures)? Which households are liquidity-constrained? (That is, which household characteristics are the correlates of liquidity-constrained status?) Do liquidity constraints affect the consumption and saving behavior of Filipino households? Do different demographic household characteristics produce different profiles of consumption, income, and saving over the life cycle? In answering the questions above, this study utilizes the cohort analysis using pseudo panels (synthetic panels). Data from the Family Income and Expenditures Survey of the years 1988, 1991, 1994, 1997, and 2000 are employed to generate the pseudo panels used in the construction of the age-consumption and age-savings profiles from a select set of the demographic characteristics of the household head, such as the gender, class of worker, and educational attainment of the household head, and from the variables related to the household, such as the type of household living arrangement and whether households receive transfers or not. Furthermore, the demographic characteristics mentioned are subdivided according to whether a household is liquidity constrained or unconstrained. The unconstrained and constrained samples are derived using the sample separation technique. The technique utilizes a probit model of liquidity constraint derived from the 1999 Annual Poverty Indicators Survey. A regression based on the Euler equation is used to verify whether liquidity constraint binds among Filipino households. This thesis contains the following findings: The whole sample age-expenditures profiles revealed a hump shape profile, which violated the PILCH. However, an interesting finding came out when the sample was divided. This highlights the role of the credit institutions in shaping the patterns of consumption and saving of households over the lifetime. As a way to minimize adverse selection problem among financial institutions, the practice of credit scoring and credit rationing are commonly observed. Liquidity constraints are results of the said behavior of financial institutions. Dividing the sample according to the liquidity constraints, the age-expenditures profile of the unconstrained group was observed to be flatter compared to hump shape profile of the constrained group. The analysis went further by controlling for the demographic characteristics related to the household and the household head. In the whole sample,
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persistent_1760656842_68f17dcae12cf Use this key to autocite in the manuscript while using SciMatic Manuscript Manager or Thesis Manager
Authors See, Edward Camaligan
Journal Malay Journal
Year 2004
DOI
DOI not found
URL
https://animorepository.dlsu.edu.ph/etd_masteral/3169
Keywords Keywords not found

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