| This dissertation studies household consumption in two developing countries, Taiwan and Mexico, using dynamic pseudo-panels constructed from repeated cross-sectional surveys. New econometric theory for the estimation of dynamic pseudo-panel models is developed and used to examine the impacts of demographic change, individual behaviour, and the macroeconomic environment on consumption over time.; The first Chapter provides asymptotic theory for the estimation of dynamic pseudo-panel models with inter-cohort parameter heterogeneity. A multidimensional limit theory is derived as both the cross-sectional and temporal dimensions of the data are allowed to pass to infinity, allowing for both stationary and non-stationary processes. In conjunction with Monte Carlo simulations on the finite-sample performance of the estimators in these two dimensions, the results lead to practical recommendations for the implementation of dynamic pseudo-panel methods.; The second Chapter investigates the extent to which modern consumption theory can account for the long and rapid growth of Taiwanese consumption. Annual household survey data from 1976–96 are used to evaluate the impacts on consumption of household composition, liquidity constraints, unanticipated aggregate shocks, hyperbolic discounting, habit formation and precautionary saving. Taiwanese consumption growth is shown to primarily result from high levels of prudence, with the faster consumption growth of younger cohorts attributed to their greater earnings risk.; Many developing nation surveys are taken at irregular intervals. The third Chapter establishes asymptotic results for the estimation of dynamic pseudo-panel models with such unequally-spaced data. Nonlinear least squares, minimum distance, and one-step estimators are used to impose the nonlinear parameter restrictions which arise in dynamic models over unequally-spaced periods. A Monte Carlo simulation study corroborates the asymptotic results.; The fourth and final Chapter examines the responsiveness of Mexican consumption to the peso crisis. The crisis is shown to have caused declines in income and consumption for all groups, with the impact differing across education and locational groups. The main smoothing mechanism is found to be a change in the composition of consumption, whereas labour supply was unresponsive to the crisis. Relative prudence is estimated to be much lower than found for Taiwan, which may help explain savings differentials between the two countries. |
