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Estimation of the consumption function of Russian households using RLMS microdata

Author

Listed:
  • Pavel Koval

    (Gaidar Institute for Economic Policy)

  • Andrey Polbin

    (Gaidar Institute for Economic Policy)

Abstract

In this paper we consider a simple model of permanent income in which households consume a certain share of permanent income, the value of which is estimated using the adaptive expectations process based on the dynamics of actual income. The parameter of propensity to consume itself depends on the characteristics of a household, such as income decile, household size, number of children, level of education, etc. The model employs RLMS microdata using OLS and IV methods and provides interpretable estimates of propensity to consume. The results can be used for the purposes of formulating economic policy.

Suggested Citation

  • Pavel Koval & Andrey Polbin, 2020. "Estimation of the consumption function of Russian households using RLMS microdata," Economics Bulletin, AccessEcon, vol. 40(3), pages 2254-2261.
    • Handle: RePEc:ebl:ecbull:eb-20-00082
    as

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    References listed on IDEAS

    as
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    4. Campbell, John Y, 1987. "Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis," Econometrica, Econometric Society, vol. 55(6), pages 1249-1273, November.
    5. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
    6. Ashraf, Quamrul & Gershman, Boris & Howitt, Peter, 2017. "Banks, market organization, and macroeconomic performance: An agent-based computational analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 135(C), pages 143-180.
    7. Yuriy Gorodnichenko & Klara Sabirianova Peter & Dmitriy Stolyarov, 2010. "Inequality and Volatility Moderation in Russia: Evidence from Micro-Level Panel Data on Consumption and Income," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 209-237, January.
    8. Dimitris Christelis & Dimitris Georgarakos & Tullio Jappelli & Luigi Pistaferri & Maarten van Rooij, 2019. "Wealth Shocks and MPC Heterogeneity," CSEF Working Papers 531, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
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    More about this item

    Keywords

    Consumption; permanent income; RLMS household survey; adaptive expectation; Koyck transformation;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • D1 - Microeconomics - - Household Behavior

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