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Essays on Structural Modeling of Life Cycle Behavior

Khorunzhina, Natalia (2011) Essays on Structural Modeling of Life Cycle Behavior. Doctoral Dissertation, University of Pittsburgh.

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    Abstract

    In the economic literature there are divergences on a number ofissues between the results obtained with macro- and micro-basedmodels. Habit formation in consumption is one example of suchdisagreement. Another example is the discrepancy between thetheoretical prediction that all investors should participate instock markets if the equity premium is positive, and empiricalevidence that a substantial fraction of individual consumers donot invest in stock markets. A primary goal of my thesis is to trynarrowing the gap between the results in these two literatures,looking at the problem from the prospective of households. Chapter1 develops a nonlinear GMM estimator to investigate the presenceof habit formation in household consumption. The estimationresults support the existence of habit formation in foodconsumption. Next, I exploit the property of habit formationpreferences to generates the time- and individual-varying RelativeRisk Aversion and Intertemporal Elasticity of Substitution toanalyze the degree of heterogeneity in these coefficients. I findthat these parameters display significant variation acrossindividuals and over time. In Chapter 2 I develop a dynamicstructural model of stock market participation and portfoliochoice to investigate whether financial education programs canaffect consumers' choices and increase participation in financialmarkets. I estimate the model, where the consumers' decisionsregarding stock market participation are influenced byparticipation costs. The results provide evidence that theparticipation cost is substantial. The model estimates are thenused to conduct simulation exercises to evaluate the effect offinancial education programs.


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    Item Type: University of Pittsburgh ETD
    ETD Committee:
    ETD Committee TypeCommittee MemberEmail
    Committee CoChairDeJong, David
    Committee CoChairRichard, Jean-Francois
    Committee MemberGayle, George-Levi
    Committee MemberFeigenbaum, James
    Committee MemberWalsh, Randall
    Committee MemberMiller, Robert
    Title: Essays on Structural Modeling of Life Cycle Behavior
    Status: Unpublished
    Abstract: In the economic literature there are divergences on a number ofissues between the results obtained with macro- and micro-basedmodels. Habit formation in consumption is one example of suchdisagreement. Another example is the discrepancy between thetheoretical prediction that all investors should participate instock markets if the equity premium is positive, and empiricalevidence that a substantial fraction of individual consumers donot invest in stock markets. A primary goal of my thesis is to trynarrowing the gap between the results in these two literatures,looking at the problem from the prospective of households. Chapter1 develops a nonlinear GMM estimator to investigate the presenceof habit formation in household consumption. The estimationresults support the existence of habit formation in foodconsumption. Next, I exploit the property of habit formationpreferences to generates the time- and individual-varying RelativeRisk Aversion and Intertemporal Elasticity of Substitution toanalyze the degree of heterogeneity in these coefficients. I findthat these parameters display significant variation acrossindividuals and over time. In Chapter 2 I develop a dynamicstructural model of stock market participation and portfoliochoice to investigate whether financial education programs canaffect consumers' choices and increase participation in financialmarkets. I estimate the model, where the consumers' decisionsregarding stock market participation are influenced byparticipation costs. The results provide evidence that theparticipation cost is substantial. The model estimates are thenused to conduct simulation exercises to evaluate the effect offinancial education programs.
    Date: 28 September 2011
    Date Type: Completion
    Defense Date: 12 July 2011
    Approval Date: 28 September 2011
    Submission Date: 19 August 2011
    Access Restriction: No restriction; Release the ETD for access worldwide immediately.
    Patent pending: No
    Institution: University of Pittsburgh
    Thesis Type: Doctoral Dissertation
    Refereed: Yes
    Degree: PhD - Doctor of Philosophy
    URN: etd-08192011-084305
    Uncontrolled Keywords: Consumption and Savings; Dynamic models; Non-linear models; Risk Aversion
    Schools and Programs: Dietrich School of Arts and Sciences > Economics
    Date Deposited: 10 Nov 2011 15:00
    Last Modified: 11 Jan 2012 14:44
    Other ID: http://etd.library.pitt.edu/ETD/available/etd-08192011-084305/, etd-08192011-084305

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