Life Cycle Hypothesis Research Articles

Household Durable Goods Spending in Urban Areas: A New Keynesian Micro Perspective

In the New Keynesian model, durable goods are typically assumed to be more responsive to monetary policy than non-durable goods. While this assumption is generally based on macroeconomic policy studies, this research aims to identify whether monetary authorities need to consider household microeconomic aspects such as dependents and long-term saving behavior when formulating policies to stimulate durable goods spending. The study employs two inverse semilogarithmic equations with micro data on urban households. Research findings confirm the existing assumption of the New Keynesian model. Durable goods spending remains sensitive to macroeconomic policies, particularly interest rate adjustments by monetary authorities. Furthermore, the research provides evidence supporting the life-cycle hypothesis for durable goods consumption among urban households. Therefore, this study underscores the pivotal role of durable goods expenditures in ensuring sustainable economic stability.

Valuing Wealth with Liquidity Restrictions

ABSTRACT Liquidity restrictions are recognized as a potential tool to help individuals avoid overconsumption, but their overall welfare implications are ambiguous. This paper quantifies the implied value of illiquid assets and identifies the conditions under which the implied value of illiquid assets exceeds its nominal value even in the absence of an illiquidity premium. We find that the implied value increases with degrees of present bias and elasticity of inter-temporal substitution. We also show that only the consumption pattern of individuals with liquidity restrictions exhibits hump-shaped dynamics, which is consistent with the well-known life cycle hypothesis and the reality.

Consumption and the permanent income of households

This study examines household consumption using data from the Israeli Consumer Expenditure (CE) Surveys and longitudinal administrative income records for 2004–16. The key findings challenge the Permanent Income Hypothesis (PIH) and the Life-Cycle Hypothesis (LCH): The propensity to consume out of income received after the CE survey is half that of income received before the survey. Households with higher income growth showed higher consumption growth. Households tend to consume a significant portion of transitory income straightaway. Finally, households without a pension plan show a marked decrease in consumption upon crossing the retirement age.

Wealth, Consumption, and Savings Patterns in Retirement: A Challenge to the Life-Cycle Hypothesis

This paper investigates the wealth, consumption, and savings behavior of elderly individuals through the lens of the life-cycle hypothesis. Using data from Survey of Health, Ageing and Retirement, we employ Student's t-test to test differences between pre-retirement and retirement age groups. The findings shed light on the extent to which elderly individuals adhere to the life-cycle hypothesis and provide insights into the economic behavior of this demographic group. Our findings align with previous studies indicating that the life-cycle theory inadequately captures the dynamics of wealth, consumption, and savings during retirement age. According to our results, there is a consistent decrease in all examined variables with advancing age, with the lowest yet non-zero values observed among the oldest individuals.

Assessing the Mediating Role of Life Satisfaction in the Nexus Between Financial Behavior and Financial Well-being

This quantitative non-experimental correlational study mainly aim to investigate the mediating effect of life satisfaction in the relationship between financial behavior and financial well-being of college students in the Davao Region. The data were collected online through Google Forms using adopted instruments. The respondents were chosen through stratified random selection. The measuring model underwent validity and reliability tests. Descriptive statistics were utilized to define the constructs in the study. The hypothesized mediation model was assessed by mediation analysis utilizing the standard algorithm bootstrapping of SmartPLS 4.0. Further, the study was anchored to the Theory of Planned Behavior, Life Satisfaction Theory, and the Behavioral Life-Cycle Hypothesis. The results indicated that the variables of the research satisfy both validity and reliability tests. The findings revealed that the students have moderate levels of life satisfaction and financial well-being while they demonstrate high levels of financial behavior.

The Relationship Between Self-Control Factors and Household Saving Behavior

We examined the effect of self-control factors on saving behavior based on the behavioral life cycle hypothesis, using the 2016 and 2019 Survey of Consumer Finances datasets. A model which included self-control factors (behavioral life cycle variables) had a more significant effect on saving behavior than a model that included only normative life cycle variables. Among self-control factors, having at least one saving rule was positively associated with saving behavior but saving goals were not significantly associated with saving behavior. Having a foreseeable major expense was negatively associated with saving behavior. The findings of this study can assist financial planners, counselors, and educators in developing and implementing strategies related to self-control factors to enhance saving behavior.

Spatial-temporal distribution of debt and delinquency of the elderly in Thailand: Perspectives from the National Credit Bureau data.

Household debt in Thailand has become a serious problem, particularly for the elderly, because they have less ability to pay debts compared to the working population. Therefore, better understanding of the elderly's debt and delinquency is crucial in policy formulation for the aged society. Previous works have focused on the elderly's debt, either at the macro or individual levels. Little is known about geographic differences at the regional level. Knowing where the elderly debt and delinquency tend to cluster could guide area-specific policies to tackle the elderly financial stability. This research aims to examine the spatio-temporal distribution of the debt and delinquency of the near-elderly population (age 50-59) and the elderly (age 60 and above) using data from the National Credit Bureau of Thailand from 2008 to 2019. The analysis focuses on various types of loans. Spatial clusters are identified by Moran's I and Local Geary statistics. The results show that the pattern of elderly debt and delinquency generally follows the life cycle hypothesis, except for credit card and business-related loans. There exist spatial clusters and spatial differences in different types of loans, suggesting regional heterogeneities that require area-specific policy responses.

Hypothesized life cycle of the snow algae Chlainomonas sp. (Chlamydomonadales, Chlorophyta) from the Cascade Mountains, USA.

Chlainomonas (Chlamydomonadales, Chlorophyta) is one of the four genera of snow algae known to produce annual pink or red blooms in alpine snow. No Chlainomonas species have been successfully cultured in the laboratory, but diverse cell types have been observed from many field-collected samples, from multiple species. The diversity of morphologies suggests these algae have complex life cycles with changes in ploidy. Over 7 years (2017-2023), we observed seasonal blooms dominated by a Chlainomonas species from late spring through the summer months on a snow-on-lake habitat in an alpine basin in the North Cascade Mountains of Washington, USA. The Bagley Lake Chlainomonas is distinct from previously reported species based on morphology and sequence data. We observed a similar collection of cell types observed in other Chlainomonas species, with the addition of swarming biflagellate cells that emerged from sporangia. We present a life cycle hypothesis for this species that links cell morphologies observed in the field to seasonally available habitat. The progression of cell types suggests cells are undergoing both meiosis and fertilization in the life cycle. Since the life cycle is the most fundamental biological feature of an organism, with direct consequences for evolutionary processes, it is critical to understand how snow algal life cycles will influence their responses to changes in their habitat driven by climate warming. For microbial taxa that live in extreme environments and are difficult to culture, temporal field studies, such as we report here, may be key to creating testable hypotheses for life cycles.

Unearthing Financial Wisdom Exploring the Factors Shaping Financial Literacy among Agribusiness Entrepreneurs in Zimbabwe

Unearthing Financial Wisdom Exploring the Factors Shaping Financial Literacy among Agribusiness Entrepreneurs in Zimbabwe

The Effect of Contributed Capital Mix on Dividend Policy: Testing Life Cycle Theory in The Covid-19 Pandemic Era

Objective: This study aims to test whether life cycle theory is relevant in the era of the Covid-19 pandemic crisis. Specifically, whether the contributed capital mix has a significant effect on dividend policy. Theoretical framework: In this study, we tested the life cycle theory and whether it is relevant to the COVID-19 pandemic situation. The dividend policy of a corporation should be determined by where it is in its life cycle. Mature, well-established businesses usually give dividends. Method: We studied 66 companies in the non-cyclical consumer sector listed on the Indonesia Stock Exchange during the pandemic period from 2020 to 2022. The dependent variables used in this study are in the category of dividend payers and non-dividend payers. As for the independent variables, we use the variables return on assets, sales growth, rete, MarCap, Papen, teta, and cash holding. We use the logistic regression method with the data panel. Results and conclusion: It is statistically found that life cycle theory is relevant to some contributed capital mixes such as rete, MarCap, Papen, and cash holding. Meanwhile, ROA, SGR, and teta have no significant effect on dividend policy paying dividends or not but still have a positive relationship direction. Implications of the research: The life cycle hypothesis is being tested in the context of the pandemic era in this investigation. A better knowledge of how company financial decisions are impacted by economic crises may result from the results, regardless of whether they confirm or refute the life cycle theory. In terms of strategic financial planning, the research may provide financial managers with useful advice. It will assist them in understanding how to modify capital structure and dividend policies in response to economic shocks such as the COVID-19 pandemic. Originality/value: Studying Life Cycle Theory in the context of a pandemic enhances the research's theoretical components. It exhibits the willingness to adapt well-established ideas to unusual and intricate circumstances, which may result in a more thorough comprehension of the dynamics underlying corporate financial decisions.

The Retirement Consumption Puzzle Effect in Indonesia: Evidence from IFLS 4 and 5

Introduction/Main Objectives: This study aims to see whether the retirement consumption puzzle occurs in Indonesia. The retirement consumption puzzle refers to when there is a decline in consumption in retirement which is not in line with the life-cycle hypothesis. Background Problems: Previous studies have revealed that consump­tion shifts when entering retirement due to efficient spending. This research analyzes the consumption pattern of the Indonesian elderly peculiarly in the frame of the retirement consumption puzzle. Novelty: There is a lack of studies on the effect of retirement on consumption by Indonesian retirees and prior research has focused on the impact of retirement on household expenditure. Research Methods: This study uses data from the Indonesian Family Life Survey (IFLS) wave 4 and 5 from the years 2007 and 2014. It uses panel data and the total sample is 2,556. It also uses the difference in differences (DiD) method to see whether the change in labor status toward retirement causes a decrease in consumption in households in Indonesia. Then, this study also uses the division of age categories as the robustness check. Finding/Results: The results of this study show that there is a retirement consumption puzzle in Indonesia indicated by a decrease of 19.9% in total expenditure per capita. Conclusion: The consumption decrease in retirement demons­trates that the government should consider pension funds and create social security programs to maintain the welfare of elderly people.

Impact of financial literacy, perceived access to finance, ICT use, and digitization on credit constraints: evidence from Qatari MSME importers

This study investigates the role of financial literacy (FL), perceived access to finance (PAF), information communication technology (ICT) usage, and digitization in alleviating the level of credit constraint that micro, small, and medium enterprises (MSMEs) face in an emerging market. We draw on the economic research theories of human capital, knowledge-based view, and lifecycle hypothesis to explain the relationship between the variables. Using survey data collected from 333 MSME importers in Qatar—a country with heavy reliance on foreign goods—we find strong evidence that FL, PAF, ICT usage, and digitization are key determinants of Qatari MSME access to credit. In particular, PAF and FL are significant and have their expected signs in almost all the Probit regressions. For ICT usage and digitization, although they are key determinants of credit constraints, the findings are more sensitive and dependent on the type of financing and the resulting type of credit constraint.

Assessing the Effectiveness of Financial Literacy Programmes in Promoting Financial Resilience among Low-Income Populations

Financial literacy and strategic financial management are interconnected and essential for achieving financial resilience, especially among individuals with low income. Thirteen women were chosen to participate in a one-day training session on financial literacy and planning in Brgy. Digkilaan, Iligan City, the Philippines. The community services programme prioritises addressing financial planning concerns due to the moderate degree of financial literacy, clear financial objectives, established financial planning practices, and active involvement of participants. The life cycle hypothesis theory was employed to assess the financial situations of workshop attendees, with a particular focus on women. Analysis of financial position was conducted using a pre-test on financial planning and literacy, a workshop presentation, a post-test, and a response profile form. The findings provide distinctive perspectives on financial profiles, allocation, and analysis. There has been a financial profile enhancement in planning and Islamic activities, but the chosen individuals restricted from earning a salary that exceeded the national minimum wage, which categorised them into the quadrant of vulnerable groups. This study shows that while the chosen individuals have higher salaries, they lack effective financial management, posing risks and limiting economic advancement. Therefore, consistent financial literacy programs are essential to build financial resilience, especially for women.

Consumption Over Life Cycle Of Remittances Recipients In Indonesia

Purpose of this study is to examine and analyze the consumption patterns of remittance recipient households using the Life Cycle Hypothesis (LCH) model. Using data from three periods of the IFLS (IFLS 2000, IFLS 2007 and IFLS 2014) and the decomposition of cohort and age effects on consumption, the results show that consumption behavior is not as described as in the LCH theory. The curve of average consumption-age in this remittance recipient household has a "hump shape" pattern.

How Does Consumers’ Self-Control Predict Financial Behavior and Financial Resilience?

This paper examines the association between self-control and consumer financial resilience. Applying Partial Least Square Structural Equation Modelling (PLS-SEM) on data sourced from the Consumer Financial Protection Bureau (CFPB), our study shows that along with the demonstrated direct relationship between self-control and consumer financial resilience, the benefit of financial practice through daily management plays a key mediating role, positively impacting consumer financial resilience. Leveraging the economic theory of the Behavioral Life-cycle (BLC) Hypothesis, our results suggest that the benefits of self-control on financial resilience largely depend on the cultivation of positive financial actions, which are reinforced through active financial management.

A Unified Oikonomia: How God’s Economy of Salvation Changes a Christian Household’s Economy

In the Bible, the word oikonomia is used in two very different ways: one material (Luke 16:2) and the other spiritual (Ephesians 1:10). The purpose of this paper will be to unify the material definition of oikonomia with the Apostle Paul’s spiritual use of the word. Once unified, a Christian household will be equipped to manage their finances (i.e., economize) in a way that fully integrates with its union with Christ. This paper concludes with three case studies, aligning oikonomia to finance-related theories, such as the life-cycle hypothesis, debt repayment, and retirement account contributions.

Can financial literacy and asset ownership affect retirement planning? Insights from the Indonesian family life survey

Research aims: In today's world, financial literacy plays a crucial role in planning for retirement. This study, therefore, investigates the connection between financial knowledge, household asset ownership, and retirement planning.Design/Methodology/Approach: The study considered variables, such as education level, age, gender, marital status, and household location, using data from the Indonesian Family Life Survey (IFLS)-5 at the household level. This study used a sample of 18,627 households spread across 13 provinces in Indonesia to represent the relationship between the variables. The Logit estimation model then examined the impact of financial literacy and household asset ownership on retirement planning.Research findings: The results suggest that individuals with higher financial knowledge are better equipped to plan for their retirement needs. Furthermore, significant asset ownership is also positively linked to retirement planning, as it indicates that an individual is better prepared to face the challenges of old age. Theoretical contribution/Originality: This study contributes to the Life Cycle Hypothesis, which states that individuals will try to keep consumption patterns/needs expenditures and ensure that individual consumption trends remain consistent/constant.Practitioner/Policy implication: This research is expected to be useful as additional information for policy actors, practitioners, and academics in the financial sector to continue actively introducing and disseminating the importance of financial knowledge to the public. Thus, people have alternative and passive income in their old age that does not require working.Research limitation/Implication: The descriptive results found a reasonably large gap between households where there are households with no savings or assets at all. The discrepancy is expected to affect the outcomes of the research.

Cooperation Behavior of Opinion Leaders and Official Media on the Governance of Negative Public Opinion in the Context of the Epidemic: An Evolutionary Game Analysis in the Perspective of Prospect Theory

The reach of online information transmission has expanded due to the rapid growth of social software and Internet technology, and the negative information generated during the COVID-19 outbreak can confuse the public. Therefore, a new challenge in the prevention and control of epidemics is how to supervise negative public perceptions. This study differentiates negative public opinion communication stages through practical cases and is based on the life cycle hypothesis. In order to examine the evolution and stability tactics of each game subject in each stage of the evolution of public opinion, a three-way evolution game model comprising social platform operators, official media, and opinion leaders is created on the basis of prospect theory. Finally, the advanced epidemic model is used to verify the important impact of cooperation between official media and opinion leaders on curbing the transmission of negative public opinion. It is found that the perceived value of game players on income and loss will significantly affect the trend of the tripartite game strategy, and the cooperative behavior of official media and opinion leaders can effectively promote the benign development of online public opinion.

COVID-19 shock 2020: impact on foreign and Kuwaiti workers and contrasts with employment, earnings and consumption during normal times

ABSTRACT This paper uses micro-level data from the 2013 official Kuwait Household expenditure survey covering 2961 households; and three 2020 COVID-19 shock-related CEO, labor force and household surveys to juxtapose the consumption profiles of foreign workers in Kuwait. The paper contributes to a growing literature on foreign workers by focusing on foreign workers’ employment and earnings and consumption profiles following the COVID-19 pandemic. The paper compares differential consumption responses of 250 foreign and Kuwaiti households during the COVID-19 shock with profiles that existed during 2013, which was a shock-free year. Moreover, since foreigners represent nearly 70% of the population, OLS regressions were applied to the 2013 microdata and the 2020 household survey to inquire if standard consumption functions deployed in the economic literature hold in the case of foreign households in Kuwait and vets how their consumption responded to income shocks. Our data and empirical analysis corroborate that Kuwait’s foreign community bore the brunt of COVID-19 in terms of employment, earnings and living conditions. Moreover, our results broadly indicate congruence with Friedman’s permanent income hypothesis, and that for given income levels, consumption heterogeneity holds for foreign workers according to age cohorts, giving support to the life cycle hypothesis. The findings carry significant implications to Kuwait’s dichotomous labor markets, and to households’ income and consumption policies especially to Kuwait’s transformative policy to realize sustainable growth.

At the origins of the life cycle hypothesis of Franco Modigliani and Richard Brumberg: an attempt at analysis

This paper re-examines the origins of the Life-Cycle Hypothesis (LCH) originally formulated by Modigliani and Brumberg seventy years ago, using a combination of historical and archival analysis. The study compares Modigliani’s own account of the LCH with a range of other sources, including papers presented at the Conference on Savings in 1952, contemporary literature, and PhD dissertations of Hamburger and Brumberg. The analysis reveals that the idea of the LCH was somehow “in the air” in the early 1950s, although Modigliani-Brumberg’s formulation represents an ingenious theoretically-founded and empirically-testable formalisation of such a framework.