Consumption Growth in a Booming Economy: Taiwan 1976-96

David McKenzie

No 28398, Center Discussion Papers from Yale University, Economic Growth Center

Abstract: Consumption and income have both grown rapidly in Taiwan over the past forty years, with younger birth cohorts experiencing faster growth. The long upward trend in consumption presents a strong challenge to the consumption smoothing predictions of the Permanent Income Hypothesis. We investigate the extent to which consumption theory can account for this trend in an environment where a large majority of households have high savings rates. Household survey data from 1976-96 are used to estimate dynamic pseudo-panel models with inter-cohort heterogeneity. We evaluate the impacts on consumption of migration, mortality, household composition, liquidity constraints, unanticipated aggregate shocks, hyperbolic discounting, habit formation and precautionary saving. Taiwanese consumption growth is found to result from high levels of prudence, with the faster consumption growth of younger cohorts attributed to their greater participation in industries with more earnings risk.

Keywords: International; Development (search for similar items in EconPapers)
Pages: 57
Date: 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://ageconsearch.umn.edu/record/28398/files/dp010823.pdf (application/pdf)

Related works:
Working Paper: Consumption Growth in a Booming Economy: Taiwan 1976-96 (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:yaleeg:28398

DOI: 10.22004/ag.econ.28398

Access Statistics for this paper

More papers in Center Discussion Papers from Yale University, Economic Growth Center Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().