Investigation on importance of relative consumption and risk aversion in consumption expenditures of Iranian households by GMM approach

Document Type : Research Article

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Abstract

The studies show that the most important feature of gross domestic production is consumption. Hence, recognizing of  factors that influence it, are very important. This article investigates importance of relative consumption (envious phenomenon) and relative risk aversion in consumption expenditures of Iranian households. For empirical study, at first,  we constructed  two weighted portfolio of  the main assets return that households  hold them. For estimating of coefficient of importance of relative consumption and coefficient of relative risk aversion in consumption, we  used Generalized Method of  Moments (GMM) with instrumental variables for 1979-2012 period. The results indicate that coefficient of envious effect is about 65 percent. This evidence shows that relative consumption is important for Iranian households and envious phenomenon is almost high between Iranian households. Furthermore, the results of estimated equations show that coefficient of relative risk aversion is between 0/59 to 0/74, That it indicates relative risk aversion is significant but it isn’t very severe. 

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Journal of Applied Economics Studies in Iran
Volume 2, Issue 8 - Serial Number 8
February 2014
Pages 13-31

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