Disposable Personal Income Research Articles

The Debt‐Payment‐to‐Income Ratio as an Indicator of Borrowing Constraints: Evidence from Two Household Surveys

Liquidity constraints have been proposed as an important explanation for deviations from the rational expectations/permanent income hypothesis. This paper introduces to the liquidity constraint literature the ratio of a household's debt payments to its disposable personal income, the debt service ratio (DSR). We find that a household with a high DSR is significantly more likely to be turned down for credit than other households. Also, the consumption growth of likely constrained households, identified using the DSR along with the liquid‐asset‐to‐income ratio, is significantly more sensitive to past income than that of other households, confirming the DSR's value in identifying constrained households.

Perjury and Proving of Demand Law

This paper proves that there are almost no normal commodities for individual consumers in consumer behavior theory. The income effects of all abnormal commodities are negative and larger than substitution effects. Both income effects and substitution effects are unobservable. All proves on demand curves of normal individual commodities or abnormal commodities are absolutely meaningless vicious circles in logical sense. The nature of demand curve that slopes lower right is irrelevant with consumers’ psychology and behaviors. The proving of consumer behavior theory on individual demand law is a perjury. At the premise that there is no limitation on personal disposable incomes and other commodities’ prices and starting from the axiom, this paper provides a strict proving on the demand curve nature of any commodity that it slopes lower right. The demand curve of Giffen goods also slopes lower right.

Spatial inequality in municipal solid waste disposal across regions in developing countries

The regional inequalities in socio-economical characteristics such as income, population density, age composition, unemployment rate and the education level may bring about variation in waste generation, recycling and collection. Using environmental Kuznets curve, the factors affecting municipal solid waste disposal are examined. The results demonstrate that an inverted N-shaped curve executes on municipal solid waste disposal for all regions. As personal disposable income increases, per capita municipal solid waste disposed firstly declines, then grows at the second stage and finally decreases again. All the explanatory variables including economic factors, social characteristics and geographical barriers are found to influence municipal solid waste disposal significantly. Each person increase in population density leads to an increase in municipal solid waste disposed by approximately 1.17 ×10 -4 kg/day. Each percent increase in age composition results in a decrease in municipal solid waste disposed by approximately 0.0224 kg/day; in the unemployment rate causes a decrease of 0.0901 kg/day and in the education level results in a decrease of 0.01556 kg/day. In general, municipal solid waste disposal starts to increase at the first turning point of personal disposable income NT$ 198,000 (about US$ 6,280) and to decrease at the second point of NT$ 389,000 (about US$ 12,350) for all regions (pooled data). The rural regions, however, cannot support the inverted N- shaped curve by the 'reduced form' while urban regions have a significant outcome. This result implies that income can only explain a portion of variation while other social and geographical factors contribute a lot to identify the variation in municipal solid waste disposal between urban and rural regions.

US Disposable Personal Income and Housing Price Index: A Fractional Integration Analysis

This paper examines the relationship between US disposable personal income (DPI) and house price index (HPI) during the last twenty years applying fractional integration and long-range dependence techniques to monthly data from January 1991 to July 2010. The empirical findings indicate that the stochastic properties of the two series are such that cointegration cannot hold between them, as mean reversion occurs in the case of DPI but not of HPI. Also, recursive analysis shows that the estimated fractional parameter is relatively stable over time for DPI whilst it increases throughout the sample for HPI. Interestingly, the estimates tend to converge toward the unit root case after 2008 once the bubble had burst. The implications for explaining the recent financial crisis and choosing appropriate policy actions are discussed.

Analysis of Poverty, Openness and Literacy in India

The objective of this study is to explore the long-term impact of the degree of openness [(total exports + total imports)/GDP at current market prices] and overall literacy rate on poverty [per capita personal disposable income as a measure of ‘absolute’ and ‘relative poverty’] in India from 1952 to 2006. By using the annual data, the present study tries to explore the impact of these factors on poverty in India through time series tools (i.e. unit root and co-integration tests). Empirical results suggest that degree of openness and overall literacy rate have positive long-term impact on per capita personal disposable income. In other words, both degree of openness and overall literacy rate are jointly responsible for the reduction of poverty (i.e. increase in per capita personal disposable income) in India during the period. This study concentrates on only two factors of poverty in India such as degree of openness and overall literacy. However, other determinants of poverty such as landholding, type of house, food security, sanitation, consumer durables, status of children, type of indebtedness, etc., have not been take into consideration. The above findings, thus, suggest that if India wants to reduce poverty and enhance economic development, it should take some special measures to increase the literacy rate and deepen the ongoing reform process through a consensus among all political parties. There is not much study on poverty in India especially exploring the long-term relationship among poverty, openness, and literacy. Thus, the present study has its own originality and will add value to policy makers.

The Debt Payment to Income Ratio as an Indicator of Borrowing Constraints: Evidence from Two Household Surveys

Liquidity constraints have been proposed as an important explanation for deviations from the rational expectations/permanent income hypothesis. This paper introduces to the liquidity constraint literature the ratio of a household’s debt payments to its disposable personal income (DSR). We find that a household with a high DSR is significantly more likely to be turned down for credit than other households. Also, the consumption growth of likely constrained households, identified using the DSR along with the liquid asset to income ratio, is significantly more sensitive to past income than that of other households, confirming the DSR’s value in identifying constrained households.

THE SPATIAL STRUCTURE OF INCOME INEQUALITY IN THE ENLARGED EU

This study examines how personal disposable income is distributed across regions, countries and larger geographical areas in the EU25 and how this distribution changed during the second half of the 1990s. Moreover, it assesses the “statistical” effect resulting from the enlargement of the European Union, and therefore the community of people for which inequality is measured. A three‐level spatial decomposition of the overall personal inequality in the EU reveals that a fifth of its amount is attributed to the east–west income gap and that intra‐regional inequality accounts for three quarters. The study detects a convergence of both average national income levels and within‐country personal income inequality. Inequality is rising primarily in the Scandinavian social‐democratic welfare states and decreasing in the Mediterranean countries of the EU15. In Eastern Central Europe, the rapid growth of inequality which had been observable during the first years of transition has come to an end.

The Economic Impact of 9/11 on the New York City Region

Regional Economic Models Inc. (REMI) has developed this comprehensive study evaluating the economic impact of 9/11 on the air industry and the overall economy of New York City and the surrounding region. Using data inputs collected from a variety of sources and REMI's own Policy Insight model for the primary analysis, REMI is able to recreate economic interactions on a regional basis and simulate the economic impact of the events of 9/11. The report will quantify the economic impacts using various economic indicators, including employment, gross regional product, output, real disposable personal income, labor productivity, and population. These impacts are analyzed for New York City (separating Manhattan itself as one region and combining the four other boroughs of the city as another region) and nine other regions of the New York City Consolidated Metropolitan Area. The impacts are also shown for the rest of the USA and combined to show the results for the entire New York City Consolidated Metropolitan Area and the USA as a whole.REMI utilized their Policy Insight software to conduct this comprehensive analysis. REMI Policy Insight is a structural forecasting and policy analysis model. It integrates input-output, computable general equilibrium, econometric and economic geography methodologies. The model is dynamic, with forecasts and simulations generated on an annual basis and behavioral responses to wage, price, and other economic factors. The overall structure of the REMI model can be summarized in five major blocks: output and demand, labor and capital demand, population and labor force, wages, price, and cost, and market shares.

Negative Economic Growth in Agriculture

Economic growth is generally defined as an increase in the productive capacity of a national economic system of producing national income (real output). Because the definition requires an organic link to the gross domestic product (gross national product) index and for an accurate performance it is compared with the number of inhabitants, the interpretation of the growth concept draw disputes to zero-growth and negative growth concepts (1). About the zero-growth concept we have already emphasized some lines in a previous article, in the same review (“Competition-zero-growth”, in Bulletin of University of Agricultural sciences and veterinary medicine/ Horticulture/vol.63/2006, ISSN 1454-2382, p.440). With that occasion, we showed the cost-originating mechanism of shaping the macroeconomic results. Profits also are generated by the cost/price ratio, in a permanent competition towards the largest share returning to the business (3). An important measure of the potential of growth, in order to define the welfare economy, the economy where Romania targets inside the wider convergence process, is the recorded “per capita disposable personal income”, in nominal and real terms (disposable personal income divided by the population); such index reveal similar trends for growth and development, which emphasis the necessity of watching and safeguard the entire system (2). Because the average rate flows, between high positive ones and much slower ones, we tackle the problem of efficiency and in extremis the opportunity of state domestic policies in order to guarantee the macroeconomic stability, the safety of the efficiency achievements on markets. From these remarks, the impact of the negative growth is the main concern in agriculture and in other Romanian economic branches too: lower returns will come up, all other incomes will decrease, and we will record a real compromise in the quality of life for the employed and their families. Economic shrinks re-orientate the resources more quickly and more profitable, and in this trend, rural development is expected to get helped, financed and supported from the macroeconomic managers, in the directions indicated by the market balances.

Personal Saving and Economic Growth

T he U.S. personal saving rate increased to nearly 5 percent in the second quarter of 2009. Although saving has its advantages, many analysts fear that a rising saving rate could hamper the economic recovery: Consumer expenditures are such a large component of aggregate demand that even a small decline in consumption could have a noticeable effect, and more saving means less consumption. We look at the data on the U.S. personal saving rate and GDP growth since 1948 for some insight into how likely it is that increased personal saving will slow economic growth. The chart shows both the quarterly U.S. personal saving rate (personal disposable income less personal outlays) and the annualized growth rate of real gross domestic product (GDP) over the period 1948:Q1–2009:Q2. The personal saving rate increased from about 6.0 percent in the late 1940s to a peak of 12.5 percent in 1975:Q2, then declined to 1.2 percent by 2007:Q4, and has since increased to 4.9 percent. Over these same periods, output grew at 3.8, 3.2, and –2.4 percent rates, respectively. Most economists believe that long-run economic growth is directly linked to economic fundamentals such as the stock of capital, technological innovation, trade policies, government tax policies, and so on. A higher saving rate does mean less consumption, but it could also result in more capital investment and, ultimately, a higher rate of economic growth. In this respect, it is interesting that the growth rate of real GDP has been higher on average when the personal saving rate is rising than when it is falling. Of course, it would be incorrect to conclude that the higher saving rate was responsible for the faster economic growth, because many things that affect economic growth are not accounted for in such a simple observation. Nevertheless, the direction has been positive. That personal saving and growth are likely to be positively related in the long run does not preclude the possibility that a higher saving rate can slow economic growth in the short run. To investigate this possibility, we calculate the simple percent correlation between the saving rate in the current quarter and the growth rate of output in the current quarter and in the next eight quarters. This is shown in the table.

A Comparison of Three Economic Impact Models for Applied Hospitality and Tourism Research

This study examines the differences between three economic impact models: the capacity utilization model (CUM), Regional Economic Models, Inc (REMI) and the impact analysis for planning (IMPLAN) model with a view to providing insights into their applicability for hospitality and tourism educators and researchers. Four databases have been used to compare the results concerning total output, income and employment. The results were most dissimilar for the ‘income’ variable. The difference in income lies in the fact that the three models estimated income in three different ways. The CUM estimated ‘payroll’, REMI estimated ‘disposable personal income’ and IMPLAN estimated ‘value added’. Due to the different income measurements, REMI's income estimates were the highest, while the CUM's were the lowest. This study does not strive to recommend one economic impact model over another; however, it does examine the behaviour of the respective models concerning various data sets and describes the underlying characteristics of the models.

The Economy, the War in Iraq and the 2004 Presidential Election

In this paper I apply the Bread and Peace model of voting in US presidential elections to analyze the sources of George W. Bush’s narrow re-election victory in 2004. The aggregate election outcome is readily explained by the model’s objectively measured political-economic fundamentals – no appeal need be made to arbitrary count, trend, dummy and switching variables. The results imply that the 2004 election turned mainly on weighted-average growth of per capita real disposable personal income over the term. The war in Iraq, which has escalated dramatically in political relevance since the 2004 contest, had a relatively small impact on the election result, most likely depressing Bush’s two-party vote share by less than a half percentage point.

Implications of the ‘bread and peace’ model for the 2008 US presidential election

Presidential election outcomes are well explained by just two objectively measured fundamental determinants: (1) weighted-average growth of per capita real personal disposable income over the term, and (2) cumulative US military fatalities owing to unprovoked, hostile deployments of American armed forces in foreign conflicts. The US economy weakened at the beginning of 2008 and average per capita real income growth probably will be only around 0.75% at Election Day. Moreover cumulative US military fatalities in Iraq will reach 4,300 or more. Given those fundamental conditions, the Bread and Peace model predicts a Republican two-party vote share centered on 48.2%.

How Much is the Working-Age Population Saving?

This paper addresses how much individuals are saving for retirement. The standard measure, the personal saving rate reported in the official U.S. National Income and Product Accounts (NIPA), has fallen dramatically and in 2004 stood at a dismal 1.8 percent of disposable personal income. But is this indicator an accurate measure of saving behavior? NIPA combines the saving of the working-age population with the dissaving of retirees. This study attempts to separate the saving of these two groups.Three conclusions emerge from the analysis. First, adjusting the NIPA personal saving rate shows that personal saving by the working-age population is significantly higher than the reported national rate. Moreover, allocating a portion of business saving to workingage households further raises their saving rate. Second, commentators should be careful not to double count saving through employer-sponsored plans by referring to pension saving and personal saving as if they were different components. In fact, for most of the time between 1980 and 2003, pension saving accounted for all of personal saving. Finally, the analysis (inadvertently) helps explain the puzzle surrounding the collapse of the total NIPA personal saving rate beginning in the early 1980s. While capital gains were part of the story in the 1990s, most of the downward trend can be explained by changes in the saving rate of those 65 and over.

Systematic review of the use of financial incentives in treatments for obesity and overweight

Nine studies met the criteria for inclusion in this systematic review of randomized controlled trials of treatments for obesity and overweight involving the use of financial incentives, with reported follow-up of at least 1 year. All included trials were of behavioural obesity treatments. Justification of sample size and blinding procedure were not mentioned in any study. Attrition was well described in three studies and no study was analysed on an intention to treat basis. Participants were mostly women recruited through media advertisements. Mean age ranged from 35.7 to 52.8 years, and mean body mass index from 29.3 to 31.8 kg m(-2). Results from meta-analysis showed no significant effect of use of financial incentives on weight loss or maintenance at 12 months and 18 months. Further sub-analysis by mode of delivery and amount of incentives although also non-statistically significant were suggestive of very weak trends in favour of use of amounts greater than 1.2% personal disposable income, rewards for behaviour change rather than for weight, rewards based on group performance rather than for individual performance and rewards delivered by non-psychologists rather than delivered by psychologists.

Advertising, Individual Consumption Levels, and the Natural Environment, 1900–2000

One central determinant of global environmental change is the continued expansion of personal consumption levels. In order to more fully understand the relationship between consumption and environmental degradation, the determinants of consumption must first be identified. Prior research in this area has focused on economic factors, primarily personal disposable income and population demographic characteristics. The role of cultural factors, including advertising, has been actively mentioned in theoretical analyses of the driving forces of individual consumption. However, this has not been empirically tested. In this article, we conduct an analysis of the impact of advertising on consumption levels in the United States. We start with a theoretical discussion of the literature on advertising and consumption. Based on this literature, we establish three hypotheses regarding the relationship between advertising expenditure and personal consumption. These hypotheses are then tested using time series analysis over the time period 1900–2000. The results show that advertising significantly impacts overall consumption and that these effects vary by type of consumption. We conclude with a discussion of the implications of this analysis for further research into the driving forces of global environmental change.

Do High Debt Payments Hinder Household Consumption Smoothing?

Recently, U.S. households have committed a rising share of disposable personal income to required principal and interest payments on household debt. Studies of the direct link between the household debt service ratio (DSR) and consumption show mixed resultsâ perhaps because debt may instead alter the relationship between consumption and income. We explore this possibility by comparing the consumption smoothing behavior of households over the DSR distribution. We find that a high DSR alone does not indicate higher sensitivity of consumption to a change in income. However, we find evidence that the DSR may help identify borrowing constrained households. In particular, the consumption of households with low liquid assets and high DSRs is more sensitive than the consumption of other low liquid asset households. Although this effect of high DSR is not precisely estimated, it is large and robust to changes in the specification, suggesting that more work is warranted.

Do High Debt Payments Hinder Household Consumption Smoothing?

Recently, U.S. households have committed a rising share of disposable personal income to required principal and interest payments on household debt. Studies of the direct link between the household debt service ratio (DSR) and consumption show mixed results—perhaps because debt may instead alter the relationship between consumption and income. We explore this possibility by comparing the consumption smoothing behavior of households over the DSR distribution. We find that a high DSR alone does not indicate higher sensitivity of consumption to a change in income. However, we find evidence that the DSR may help identify borrowing constrained households. In particular, the consumption of households with low liquid assets and high DSRs is more sensitive than the consumption of other low liquid asset households. Although this effect of high DSR is not precisely estimated, it is large and robust to changes in the specification, suggesting that more work is warranted.

OFFICIAL REVISIONS TO SOUTH AFRICAN NATIONAL ACCOUNTS DATA: MAGNITUDES AND IMPLICATIONS

AbstractThis paper investigates the bias and dispersion in official revisions of eight national accounting growth rates. The growth in GDP, consumption expenditure and personal disposable income by households has been subject to significant upward revisions and bias, especially after 1994. No significant bias was found in the revisions to the other national accounting aggregates. The official revisions are subject to a high degree of dispersion. Based on the 1984‐2003 period, there is a 30 per cent probability that the “final” growth rate in GDE deviates by more than 5 percentage points from the first release growth rate. For most magnitudes, other than exports and imports, the dispersion in South Africa's official revisions is similar to that of a sample of OECD countries. Using two examples, it is shown that the vintage of the data has a profound impact on the magnitude and significance of regression results based on such data.

Multicointegration in US consumption data

The present study tests for the existence of multicointegration between real per capita private consumption expenditure and real per capita disposable personal income in the USA. In doing so, the study exploits the fact that the flows of disposable income and consumption expenditure on the one hand, and the stock of consumers' wealth, which can be considered as cumulative past discrepancies between the flows of income and expenditure, on the other hand, can be thought of as a stock-flow model, in which multicointegration is likely to occur. Recently developed I(2) techniques are applied for testing for multicointegrating relations and find supporting evidence for the existence of multicointegration in US consumption data.