Level of Income and its Distribution as Determinants of Korean Expenditure Patterns

Abstract

Even though the permanent income and relative income hypotheses have been utilized in past research to explain consumer behavior, no previous attempt has been made to integrate them into one model in explaining household expenditure behavior. In this article, the hypotheses are synthesized into a single model. The model was empirically tested using data from the 1996 Korean National Survey of Family Income and Expenditures. The results indicate that household expenditure behavior is generally explained by both hypotheses when integrated in one model. However, the impact of relative income and permanent income varies by expenditure categories.