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Three Essays on Household Life-Cycle Investment Decisions.

Record Type:	Electronic resources : Monograph/item
Title/Author:	Three Essays on Household Life-Cycle Investment Decisions./
Author:	Zhang, Yu.
Published:	Ann Arbor : ProQuest Dissertations & Theses, : 2018,
Description:	156 p.
Notes:	Source: Dissertations Abstracts International, Volume: 80-07, Section: A.
Contained By:	Dissertations Abstracts International80-07A.
Subject:	Economics. -
Online resource:	http://pqdd.sinica.edu.tw/twdaoapp/servlet/advanced?query=13819327
ISBN:	9780438771628

Three Essays on Household Life-Cycle Investment Decisions.
Zhang, Yu.

Three Essays on Household Life-Cycle Investment Decisions. - Ann Arbor : ProQuest Dissertations & Theses, 2018 - 156 p.

Source: Dissertations Abstracts International, Volume: 80-07, Section: A.

Thesis (Ph.D.)--The Ohio State University, 2018.

This item must not be sold to any third party vendors.

In this dissertation, I present three essays to study two household life-cycle investment decisions concerning children and housing: 1) childbearing and sex selection decisions with incomplete financial markets; and 2) housing tenure and size choices when renters and homeowners perceive ambiguity and risks with regard to future house prices. The first essay examines childbearing decisions in developing countries where financial markets are incomplete, due to the lack of old-age entitlements, insurance and access to credit, and where social norms place expectations on children to support their parents financially in old age. Of special interest is how gender-specific differences in these expectations, with greater expectations placed on males, affect savings and childbearing decisions and potentially promote the use of sex-selective abortion. I build a discrete-time stochastic life-cycle model for parents residing in China with three stages (fertile working life, infertile working life, and retirement) in which children serve as an asset that is illiquid during the parents' working life, but which provides a financial payoff to the parent upon and after retirement. In each period of the fertile phase, parents observe the size and gender composition of their family, their cash holdings, and their stage in the life-cycle and decide how much to save, and whether to conceive a child and, if so, whether to test for the sex of the resulting fetus and abort if it is female. I solve the model numerically using collocation methods and backward induction, and analyze it using stochastic simulation techniques. My results show that: 1) a less restrictive birth control policy and higher returns on liquid wealth accumulation increase the number of children a household will have, but decreases the use of selective abortion; and 2) more generous government old-age entitlements and more liberal access to credit reduce the number of children and the use of selective abortion simultaneously. My reduced-form analysis based on the multinomial logit model with fixed effects also shows that the parents with the social security are less likely to have an additional child and to make sex selection than if they would not have the social security. In the second essay, I examine the housing tenure choice and housing size choice of households when they perceive both risks and ambiguity for future house price growth. Facing ambiguous house price growth, ambiguity-averse households may have opposite decisions on housing tenure. On the one hand, provided that an agent values the utility of owning a house very much, ambiguity-averse agents may tend to buy a house early to hedge against greater ambiguity in the future if they perceive greater ambiguity in distant future than in near future, which is defined as the hedging effect. On the other hand, the existence of ambiguity makes the housing as an asset less desirable for ambiguity-averse households, which will decrease their inclination to buy a house. This effect is defined as financial ambiguity effect. In essay 2, I build and solve a dynamic life-cycle model to test the hedging effect of owning a house immediately against the more ambiguous house prices in the distant future. I employ a dynamic, stochastic and heterogeneous model in which the households exhibit α-MaxMin preference and form multiple prior distributions for the annual house price growth and rental price growth. Households are either renting a house or owning a house at the beginning of each period. If renting, the households need decide whether to buy a house or keep renting, and choose the purchased housing size if buying a house, by observing current liquid wealth, rented housing size and house prices; if owning, they need decide whether to sell the house to become a renter or keep owning, and choose the rented housing size if selling the house, by observing current liquid wealth, owned housing size and house prices. The important features of the model are that the perceived ambiguity about house prices and rental prices is greater in distant future than in near future and the perceived ambiguity across housing market and rental market are the same. I solve the model numerically using backward induction, and analyze it using stochastic simulation techniques. My results show that: 1) Given that agents perceive greater ambiguity in distant future than near future, ambiguity-averse agents are more likely to buy a house immediately to hedge against the greater ambiguity about house prices in distant future; and 2) conditional on buying a house, greater ambiguity in distant future incentivizes ambiguity-averse home buyers to buy a larger house than ambiguity-seeking home buyers. (Abstract shortened by ProQuest.).

ISBN: 9780438771628Subjects--Topical Terms:

517137
Economics.

Three Essays on Household Life-Cycle Investment Decisions.
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300 $a 156 p.
500 $a Source: Dissertations Abstracts International, Volume: 80-07, Section: A.
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502 $a Thesis (Ph.D.)--The Ohio State University, 2018.
506 $a This item must not be sold to any third party vendors.
506 $a This item must not be added to any third party search indexes.
520 $a In this dissertation, I present three essays to study two household life-cycle investment decisions concerning children and housing: 1) childbearing and sex selection decisions with incomplete financial markets; and 2) housing tenure and size choices when renters and homeowners perceive ambiguity and risks with regard to future house prices. The first essay examines childbearing decisions in developing countries where financial markets are incomplete, due to the lack of old-age entitlements, insurance and access to credit, and where social norms place expectations on children to support their parents financially in old age. Of special interest is how gender-specific differences in these expectations, with greater expectations placed on males, affect savings and childbearing decisions and potentially promote the use of sex-selective abortion. I build a discrete-time stochastic life-cycle model for parents residing in China with three stages (fertile working life, infertile working life, and retirement) in which children serve as an asset that is illiquid during the parents' working life, but which provides a financial payoff to the parent upon and after retirement. In each period of the fertile phase, parents observe the size and gender composition of their family, their cash holdings, and their stage in the life-cycle and decide how much to save, and whether to conceive a child and, if so, whether to test for the sex of the resulting fetus and abort if it is female. I solve the model numerically using collocation methods and backward induction, and analyze it using stochastic simulation techniques. My results show that: 1) a less restrictive birth control policy and higher returns on liquid wealth accumulation increase the number of children a household will have, but decreases the use of selective abortion; and 2) more generous government old-age entitlements and more liberal access to credit reduce the number of children and the use of selective abortion simultaneously. My reduced-form analysis based on the multinomial logit model with fixed effects also shows that the parents with the social security are less likely to have an additional child and to make sex selection than if they would not have the social security. In the second essay, I examine the housing tenure choice and housing size choice of households when they perceive both risks and ambiguity for future house price growth. Facing ambiguous house price growth, ambiguity-averse households may have opposite decisions on housing tenure. On the one hand, provided that an agent values the utility of owning a house very much, ambiguity-averse agents may tend to buy a house early to hedge against greater ambiguity in the future if they perceive greater ambiguity in distant future than in near future, which is defined as the hedging effect. On the other hand, the existence of ambiguity makes the housing as an asset less desirable for ambiguity-averse households, which will decrease their inclination to buy a house. This effect is defined as financial ambiguity effect. In essay 2, I build and solve a dynamic life-cycle model to test the hedging effect of owning a house immediately against the more ambiguous house prices in the distant future. I employ a dynamic, stochastic and heterogeneous model in which the households exhibit α-MaxMin preference and form multiple prior distributions for the annual house price growth and rental price growth. Households are either renting a house or owning a house at the beginning of each period. If renting, the households need decide whether to buy a house or keep renting, and choose the purchased housing size if buying a house, by observing current liquid wealth, rented housing size and house prices; if owning, they need decide whether to sell the house to become a renter or keep owning, and choose the rented housing size if selling the house, by observing current liquid wealth, owned housing size and house prices. The important features of the model are that the perceived ambiguity about house prices and rental prices is greater in distant future than in near future and the perceived ambiguity across housing market and rental market are the same. I solve the model numerically using backward induction, and analyze it using stochastic simulation techniques. My results show that: 1) Given that agents perceive greater ambiguity in distant future than near future, ambiguity-averse agents are more likely to buy a house immediately to hedge against the greater ambiguity about house prices in distant future; and 2) conditional on buying a house, greater ambiguity in distant future incentivizes ambiguity-averse home buyers to buy a larger house than ambiguity-seeking home buyers. (Abstract shortened by ProQuest.).
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710 2 $a The Ohio State University. $b Agricultural, Environmental and Developmental Economics. $3 1675077
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