Spending Propensities Research Articles

The Retirement Consumption Puzzle: A Mental Accounting Explanation

Recent developments in cognitive psychology and behavioral economics may explain the lower-than-predicted asset decumulation behavior posited by traditional life-cycle models during retirement, dubbed the retirement consumption puzzle. This study examines if mental accounting could be used to explain the retirement consumption puzzle. Utilizing panel data collected from the 1992–2018 Health and Retirement Studies, retiree age and age squared are examined using fractional polynomials and fixed effects regressions for their associations with varying categorical retiree asset decumulation patterns, including retiree wealth, nonhousing wealth, stocks, retirement accounts, bonds, liquid assets, vehicles, primary residence, and home equity. The results suggest that varying asset decumulation behaviors exist among retirees, which could be explained by retirees’ discretionary spending propensities. The discussion highlights the importance of understanding retiree behavioral spending constraints to allow for smooth consumption paths.

Understanding compensatory travel

Resources to which people expect to represent their social and personal status influence important traveler decisions. Yet we know little about the antecedents and consequences of travelers' behavior under resource fluctuation. Three studies examined how resource status affects travelers' spending propensities in crisis times from the life-history framework. Results presented that travelers with lower childhood backgrounds increased their willingness to pay for international flights to compensate for their resource deficit when their current income is relatively low and travel restriction is severe. Without resource-scarce cues, travel intentions were associated with travelers' childhood travel habits. The research suggests potential customer relationship strategies by showing how and why travelers' life histories affect compensatory behavior that companies may adopt during the industrial crisis.

Wealth distribution for agents with spending propensity, interacting over a network.

Wealth distribution in an economic system is studied by means of an agent model, where agents have a certain spending propensity and they interact over a given network. When the network is random, or scale-free ( ∼k-α) with α below 1, approximately, results are equivalent to having all agents allowed to interact with any other agent. However, values of α>1 affect both the wealth distribution and the behavior at the tail. These results hold both in the absence of spending propensity and when the spending propensity follows a power-law. Results suggest that Pareto's law is a very robust phenomenon with respect to the details of the connectivity of the agents and that the ubiquity of Pareto's law in actual systems may have implications on the topological properties of the underlying networks of interaction.

Measuring the Impacts of Consumers' Demographics on Spending Propensity and Expenses on Firms Profitability using Market Basket Optimization Model

Measuring the Impacts of Consumers' Demographics on Spending Propensity and Expenses on Firms Profitability using Market Basket Optimization Model

Measuring the Impacts of Consumers’ Demographics on Spending Propensity and Expenses on Firms Profitability using Market Basket Optimization Model

Market Basket Analysis (MBA) and its importance in selecting the right basket of goods have obtained considerable interest among the managers and executives of many retail stores. The present study has explored the literature gap in measuring the determinants for managing the optimum market basket of goods for consumers. The study found that some customer demographic and firm specific expense variables provide important prediction power to measure the customer spending propensity and firms’ profitability respectively. We have used two different market basket optimization models to measure and analyze the results. The results show significant influence of age and advertising expenses on consumers’ propensity to expense and firms’ profitability respectively. The study has used two regression models to analyze the market basket using WarpPLS and R Software. Finally, the study suggests for future study to measure the impacts of consumer behavioral and psychological aspects and industry types on the spending propensity and firms’ profitability through market basket analysis.

Measuring the Impacts of Consumers' Demographics on Spending Propensity and Expenses on Firms Profitability using Market Basket Optimization Model

Measuring the Impacts of Consumers' Demographics on Spending Propensity and Expenses on Firms Profitability using Market Basket Optimization Model

Psychological Factors of Tourist Expenditure: Neglected or Negligible?

Despite recent progress in identifying the factors of tourist expenditure, knowledge of the psychological characteristics of tourists is necessary to fully understand their impact. Therefore, this study attempts to extend the economic, sociodemographic and trip-related factors by including psychological factors in the econometric models. A total of 1,036 Slovak tourists who paid for summer holidays abroad in the summer of 2021 were interviewed. Three of the six psychological factors analysed (two stable personality characteristics – conscientiousness and agreeableness as well as four tendencies expressing willingness to spend or save – spendthrift, tightwad, thrift and spending propensity) correlated significantly with the amount of expenditure. In addition to income, type of travel, children and duration of the stay, the results of the partial least squares test revealed the net effects of tightwad, spending propensity and thrift. The magnitude of the effects of psychological factors points to the need for further research.

Measuring the Impacts of Consumers’ Demographics on Spending Propensity and Expenses on Firms Profitability using Market Basket Optimization Model

Measuring the Impacts of Consumers’ Demographics on Spending Propensity and Expenses on Firms Profitability using Market Basket Optimization Model

Money Growth and Social Stability

Aim: Both the Keynesian and the Fisherian channels of sovereign money growth have slowed down significantly in the decade following the Global Financial Crisis (GFC). This, together with the rise of fintech, privately issued unbacked crypto-assets tried to fill this void. These developments have revived the interest on the Central Bank Digital Currency (CBDC) idea and on potential channels for future sovereign money growth. The aim of this paper is to compare the Keynesian and Fisherian channels of sovereign money growth regarding their impact on wealth distribution and inflation. 
 Design / Research Methods: To achieve our aim we use a simple Agent Based Model (ABM) to capture heterogeneity. In our model, the agents are heterogeneous consumers with different spending propensities but with equal initial wealth levels and with exactly same non-interest incomes over time. 
 Conclusions / findings: We show that Keynesian (uniform) money growth channel has a softening effect on the wealth dispersion and thereby, on the downward pressure on money velocity. The model indicates that the inclusive nature of current post-Covid19 recovery plans may have a desirable impact on social stability. Yet, these plans may also be more inflationary in comparison the post-GFC policies.
 Originality / value of the article: This paper shows that heterogeneity of economic agents should not be ignored by policy makers and that ABM is a convenient tool to design and analyse monetary and fiscal policies under heterogeneity.
 Implications of the research: The implication for policy makers is that the demand deficiency associated with the fall in money velocity and the worsening of wealth dispersion may be softened by a more inclusive money growth regime, potentially with the practical use of CBDCs. Yet the extra inflationary impact of such a regime need to be kept in mind.

Digital government platforms: issues and actions in Europe during pandemic time

The aim of the present research is to measure and assess the rise and consolidation of the digital government platforms effectiveness in the period 2016-2020 within European Union. A breakdown between countries based on their GDP expenditure share in ICT (Information and Communication Technology) is developed, in order to identify the spending propensity of the members EU 28 in the digital economy. Furthermore, with the support of the Digital Effectiveness Performance Index (DEPI). Starting from the Government Effectiveness Index (GEI), according to the five DESI dimensions, aims at identifying the sources of digital platforms effectiveness for each country. The cross national comparative study shows that in order to reduce the gap within the EU Member States, it is strategic to develop an ambitious government actions to support the remote working in terms of opportunities, challenges, drivers, processes, and consequences of the single performances, in digital dimensions, of European countries.

Influence of Post Covid Change In Consumer Behaviour of Millennials On Advertising Techniques and Practices

The pandemic caused by Covid 19 has kicked off survival strategies from vulnerable groups of people to small businesses, which has challenged the core operating practices and modified consumption patterns. Thus, effective marketing strategies are imperative in these times, that not only convey values of the brand but also resonate with people. Market disruptions are most likely to impact millennials and Gen Z and given the exploration and spending propensity, millennials are most likely to drive demand during the pandemic as well as in the post pandemic world. This research proposal aims to explore how consumer habits have changed during pandemic, how likely these habits will stick in the post pandemic world and how advertising needs to be transformed which relates best with millennials. The methodology involves a detailed analysis of literature and gathering insights from social media sites through big data. This research investigates the impact of avoiding deterministic automatisms purchasing processes, implying the need to understand, from an academic and conceptual standpoint, the utility of the set of business strategies to truly influence consumer purchasing behaviour of Millennials.

Attitude toward environmental protection and toward nature: How do they shape consumer behaviour for a sustainable tomato?

Several research efforts have tried to explain the forces driving food-related decisions. In this article, we explore how individual attitude toward the environment could be a potential determinant of green behavior. This research offers an original methodological framework never adopted in the food consumption domain that is based on the contribution of Campbell Paradigm and the related advancements on attitude measures proposed by the environmental psychology literature. We also contribute to the literature by envisaging a two-dimensional environmental attitude, that distinguishes between attitude toward environmental protection and toward nature appreciation. The ultimate target is to explain consumer purchasing intentions, represented by Willingness to Pay, toward a hypothetical tomato with improved resource use efficiency taking into account consumer psycho-attitudinal propensity towards environmental issues. The analysis is conducted in Italy and in the UK, two countries characterized by different perceptions about tomato as a consumption good and about water related issues. Findings indicate that the two dimensions of consumer attitude affect differently the spending propensity for a sustainable tomato and these differences are also country-specific. The analysis suggests that policies aimed at promoting sustainable food products should also target the consumer type (naturalist or environmentalist) that is more sensible to environmental sustainability.

English Language Proficiency and Immigrant Families Annual Earnings and Medical Care Spending in the USA

This study reports on the role of English language proficiency (ELP) in immigrants' health and economic integration in the USA. Bayesian Markov Chain Monte Carlo (MCMC) estimation of a mixed bivariate ordered probit specification of annual earnings and medical care spending is conducted using a representative sample of immigrant families' data from the 2015-2017 US National Health Interview Surveys (NHIS). The results reveal that annually, limited ELP has an increasingly negative impact on immigrants' propensity to earn income (-$44.83, -$50.66 and -$56.97), while simultaneously positively impacting at a decreasing rate their propensity to spend on medical care ($8.09, $6.09 and $4.32). Furthermore, a positive and significant 7.2% correlation coefficient is found between annual earnings and medical care spending propensities, suggesting that the income effect of higher earnings from increased ELP outweighs the substitution effect leading to higher health consciousness and preventive care spending. Thus, policies aimed at raising immigrants' families ELP in the USA would not only contribute to their effective socio-economic integration, but also strengthen the US workforce and economy in the long run.

Demand deficiency, money velocity and heterogeneity

Aim: Money velocity data for the United States show that there is a decline in all of the broad money aggregates in recent decades. This points to a sustained demand deficiency element. Can consumer heterogeneity be the cause of this declining trend? The aim of this paper is to find an answer for this question.
 
 Design / Research Methods: To achieve our aim we use Agent Based Modelling (ABM). In our model, the agents are heterogeneous consumers with different spending propensities.
 
 Conclusions / findings: We show that heterogeneous consumers with different spending propensities alone puts a downward pressure on money velocity. This pressure is coupled with a sustained worsening in the wealth distribution. We observe that as money accumulates in the hands of agents with the lowest propensity to spend, money velocity keeps declining. This also puts a downward pressure on nominal aggregate demand and hence a deflationary bias on the general price level.
 
 Originality / value of the article: This paper shows that heterogeneity of economic agents should not be ignored and that ABM is a very powerful tool to analyse heterogeneity.
 
 Implications of the research: The implication for policy makers is that the demand deficiency associated with the fall in money velocity will persist until the worsening of wealth dispersion comes to a halt.

Analyzing Domestic and International Project Finance Law: Discussion of Budget Overruns in Supported by the UK Government Infrastructure Projects

The purpose of this research is to compare the UK Government financing practices in international versus domestic projects. In the process of comparative analysis, the autonomous spending propensity of the UK Government seems to be a cause for increase in total project’s costs. After looking closely into all viable options, a legislative solution to the issue of budget overruns and delays appears to be necessary. In the analysis of historic legislation, it is shown that the risky investments are not limited by a regulation and their approval by taxpayers is not required. The disproportional involvement of the UK Government in projects abroad in comparison to defective domestic developments casts serious doubt as to the reasonable cost-benefit analysis. And because the taxpayers have no direct impact on the UK Government’s export of capital, the system of selecting a project for government investing shall be restructured. The main issue is that the current statutory framework for under-performing projects does not preclude the issuance of additional capital. In the Proposed Solution section of this research, the enactment of law governing the pitfalls at the budget estimation stage is discussed from sociolegal perspective.

The role of English language proficiency on immigrants' health and economic integration in the USA

This study reports on the role of English language proficiency (ELP) in immigrants' health and economic integration in the USA. Bayesian Markov Chain Monte Carlo (MCMC) estimation of a mixed bivariate ordered probit specification of annual earnings and medical care spending is conducted using a representative sample of immigrant families' data from the 2015-2017 US National Health Interview Surveys (NHIS). The results reveal that annually, limited ELP has an increasingly negative impact on immigrants' propensity to earn income (-$44.83, -$50.66 and -$56.97), while simultaneously positively impacting at a decreasing rate their propensity to spend on medical care ($8.09, $6.09 and $4.32). Furthermore, a positive and significant 7.2% correlation coefficient is found between annual earnings and medical care spending propensities, suggesting that the income effect of higher earnings from increased ELP outweighs the substitution effect leading to higher health consciousness and preventive care spending. Thus, policies aimed at raising immigrants' families ELP in the USA would not only contribute to their effective socio-economic integration, but also strengthen the US workforce and economy in the long run.

Reported Effects versus Revealed-Preference Estimates: Evidence from the Propensity to Spend Tax Rebates

We evaluate the consistency of two methods for estimating the effect of an economic policy: (i) asking people how the policy caused them to change their behavior (reported effects) and (ii) inferring this change using data on behavior and differences in treatment across people (revealed-preference estimates). Both methods are widely used to measure spending caused by increases in liquidity. Using federal stimulus payments disbursed quasi-randomly in 2008, we find larger revealed-preference estimates of spending propensities for households who report greater spending responses, and the methods produce similar average propensities. But evidence is mixed on the relationship between spending propensities and liquidity. (JEL C83, D14, D91, E62, H24, H31)

Extrém sportfogyasztás vizsgálata egy kutatás tükrében

Nowadays, more and more research focuses on recreational sports consumption, its motivational background, the determination of target group characteristics. Extreme sports are becoming more and more prominent in leisure sports and are increasingly represented in competitive sports. In our research, we are dealing with Extreme Sports Consumption, Questionnaires were collected in the form of a Google Survey, an online questionnaire survey, which was divided into groups of people who focused on individuals with a variety of social media and targeted extreme sport interests. Data was processed using IBM SPSS software, basic statistics and correlation analysis. Our results were also graphically illustrated. After data deletion, we processed 167 questionnaires. The results show that men prefer extreme sports. Our study shows that in Hungary, the most popular recreational extreme sports are cross cycling, rock climbing, mountain bike, paintball and skateboarding. Among young people with higher incomes, there is a significantly higher proportion of extreme sports consumption. Because expensive sport thus assumes higher discrepancies in income and higher spending propensity, which is confirmed by our research. The brand selection of sports equipment for young adults with extreme sports is not characterized by extreme sports-specific brands, but by classic market-leading sports brands (Nike, Adidas).

The Effect of Student Loan Debt on Spending: The Role of Repayment Format

Across three studies, the authors investigate the effect of student loan debt on spending. Evidence from consumer finance data and experimental scenarios reveals that borrowers with moderate student loan debt are less likely to spend than people with low (or no) debt. However, borrowers with high debt are more likely to spend relative to those with moderate debt. The latter effect is consistent with goal disengagement, as paying off high student loan debt seems difficult. Importantly, the spending propensity associated with high student loan debt is attenuated by presenting the debt in a monthly payment (vs. lump-sum) format, which reduces perceived payoff difficulty. From a public policy perspective, the authors recommend that estimated monthly payments be included in all student loan disclosures.

Pandering and pork-barrel politics

We develop a model of pork-barrel politics in which a government official tries to improve her reelection chances by spending on targeted interest groups. The spending signals that she shares their concerns. We investigate the effect of such pandering on public spending. Pandering increases spending relative to a non-accountable official (one who does not have to run for reelection) if either the official's overall spending propensity is known, or if it is unknown but the effect of spending on the deficit is opaque to voters. By contrast, an unknown spending propensity may induce the elected official to exhibit fiscal discipline if spending is transparent.