Consumption Behaviors in the East and South-East Asian Economies

IDE Research Bulletin


March 2015

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Some economies in the East and South-East Asian area, such as Japan and Singapore, showed rapid growths in mainly from 1960's and 1970's. From the starts of high growth, their saving ratios increased largely. This abundance of saving brought about the acceleration of investments. However, it is impossible to find a model to explain this mechanism of economic growth. In the first paper in this project, it is explained by the shift of the utility function of consumer. To make clear the mechanism and effect of this shift, the consumer's good is divided into two sectors, durable goods and non-durable goods. For the simplification, modeling is conducted as a two periods' model.

In the economies such as Japan, Singapore and Taiwan, the saving ratio started to rise spontaneously with the start of high economic growth. It was not caused by government's policy. It seems like that the time preference rate changed from present priority to future priority. With the beginning of high economic growth, people could be thought to activate saving behavior, intending to purchase durable consumption goods.

It could be understood that the time preference rate has an important role to decide the consumption and saving. We consider this is one of the decisive factors for the economic development. In the second paper in this project, the author intends to identify the factors influencing time preference of rural households in relation to economic activities on farm house holds.

Present time preference is often seen among poor households in developing countries. This might impose constraints on economic growth in the national economy level as well as on production and consumption activities in the individual household level. A field experimental survey was conducted in 2014 to understand the determinants of time preference among rice producing households in an irrigated farming district in the Mekong Delta in Vietnam. Individual time preferences observed through a field experiment were heterogeneous among the respondents of heads of households and relatively high on average. Demographical factors such years of schooling and gender showed significant contributions to achieve higher technical efficiency in rice cultivation. However, many demographical and economic factors failed to explain the difference in time preference among participants. Low discount rates might not be as yet important for the rural households producing staple food of rice in the irrigated area of Monsoon Asia.

Summaries of these two papers are shown below.