Essays on Macroeconomic Analysis of Development

Authors

Nazmul Islam, Florida International UniversityFollow

Document Type

Dissertation

Degree

Doctor of Philosophy (PhD)

Major/Program

Economics

First Advisor's Name

Mihaela I. Pintea

First Advisor's Committee Title

Committee chair

Second Advisor's Name

Cem Karayalcin

Second Advisor's Committee Title

Committee member

Third Advisor's Name

Tobias Pfutze

Third Advisor's Committee Title

Committee member

Fourth Advisor's Name

Timothy F. Page

Fourth Advisor's Committee Title

Committee member

Keywords

Hand-to-Mouth, Indebted, Liquidity, Household Portfolio, Income Distribution, Marginal Propensity to Consume, Healthcare Expenditure, Income Elasticity, Resource Constrained Community, Box-Cox model

Date of Defense

6-13-2019

Abstract

This dissertation includes three essays on empirical studies of macroeconomic analysis of development. The first and second chapter focus on defining different categories of households based on the type of wealth they hold, deriving their demographic characteristics and how they react to transitory income shocks. The economics literature splits households into poor hand-to-mouth (P-HtM), wealthy hand-to-mouth (W-HtM), and not hand-to-mouth (N-HtM). This breakdown is important to accurately capture how different categories of households react to income shocks.

In Chapter 1, I argue that this classification is missing important features related to the behavior of indebted households. Thus, novel in the literature, I define a new category of households: the indebted poor hand-to-mouth (IP-HtM), those that hold no net liquid assets (cash, checking, savings accounts etc.) and are indebted in illiquid wealth (negative net value of illiquid wealth defined as a negative net mortgage value that is not offset by positive illiquid assets such as private retirement accounts). I identify the share of such households in the United States, their demographic characteristics, their portfolio composition, and the persistence of their status over their life cycle. In the literature, they assimilate into the P-HtM households that hold neither net liquid nor net illiquid assets. However, I show that the age profile of IP-HtM households by demographic characteristics demonstrates almost the same pattern as W-HtM households that do not hold liquid assets but own sizable amounts of illiquid wealth.

In the second chapter, I perform a detailed analysis of how various items of consumption such as food, nonfood, durable, nondurable, social sector, healthcare, utilities and education expenditure respond to transitory income shocks. The IP-HtM exhibits the highest marginal propensity to consume among all categories of households, for most consumption items. This implies that the stimulatory government’s policies are the most effective for the IP-HtMs. This research can help governments design and execute their fiscal policies targeting the highest stimulatory effect during recessions.

In the third chapter, I use a 2013 survey of rickshaw pullers in Dhaka, Bangladesh to identify the determinants of their households’ healthcare expenditure using a flexible Box-Cox model regression method. The results suggest that income, distance of residence from healthcare center/hospital, age of household head, and duration of illness episode are the main determinants of healthcare utilization. The income elasticity of about 0.55 signals the tendency for healthcare to behave like a normal and necessary good. Since healthcare is a necessity in the “basic needs” theory of economic development, the way healthcare expenditure in a resource-constrained community responds to changes in income level and other factors is particularly relevant to development policy. Working-class populations in developing countries have unmet healthcare needs, and effective policies and programs are needed to ensure that healthcare services are received in a timely manner.

Identifier

FIDC007776

Recommended Citation

Islam, Nazmul, "Essays on Macroeconomic Analysis of Development" (2019). FIU Electronic Theses and Dissertations. 4257.
https://digitalcommons.fiu.edu/etd/4257