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

ROSHAN, REZA; PAHLAVANI, MOSAYEB; SHAHIKI TASH, MOHAMMAD NABI

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

Document Type : Research Article

Authors

REZA ROSHAN

MOSAYEB PAHLAVANI

MOHAMMAD NABI SHAHIKI TASH

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.

Keywords

Relative consumption

Envious phenomenon

Risk aversion

GMM method