▼ Recent studies across a number of countries evidence a substantial decline in household consumption expenditure around the time of retirement. This phenomenon, coined as the retirement consumption puzzle, brings a challenge to the traditional life-cycle model. The life-cycle model implies that household consumption should be continuous over time including the transition to retirement, provided that retirement is a foreseeable event. To address the retirement consumption puzzle, this dissertation brings current evidence by carrying out four studies on U.S. household consumption behavior at retirement. Study 1 is a cross-sectional study using the latest available data wave from 2009 HRS CAMS. The main interest is to compare consumption behavior between non-retired and retired households. Based on the life cycle hypothesis, regardless of employment status, households sharing similar socioeconomic characteristics should exhibit similar consumption behavior. The empirical findings, however, show that the consumption behavior between non-retired and retired households is significantly different, holding all other factors constant. Spending for retired households is 8.5% lower than spending for non-retired households. Study 2 is an aggregate-panel study using data from 2001-2009 HRS CAMS. The difference between Study 1 and Study 2 is that Study 2 tracks household consumption behavior over time and investigates whether there is a significant change in consumption pattern after retirement. Fixed-effects analysis is conducted to appropriately account for the effect of individual heterogeneity. The life cycle hypothesis predicts that when retirement is as planned by the household, there is no significant change in consumption after retirement. The fixed-effects regression indicates that there is an insignificant increase of 3% in household consumption after retirement. The discrepancy in the results from Study 1 and Study 2 regarding the retirement consumption puzzle comes from the lack of control of individual heterogeneity in the cross-sectional analysis. Study 3 is a subsamples-panel study. Within the life-cycle framework, if retirement is voluntary and expected, there should be no significant change in household consumption after retirement. However, if the household head is laid-off or experiencing poor health, this household may be forced to be out of the labor market, resulting in early retirement. Because involuntary early retirement reduces the household’s lifetime resources, the household must reduce consumption and re-allocate to a new optimal consumption path. As predicted by the life-cycle model, the findings show that households with voluntary retirement have an insignificant increase in household consumption after retirement by 6%. Involuntary-retirement results in a decrease in consumption after retirement by 6-7%. The percentage difference in the household consumption change between these the two groups of households is 11-12% and statistically significant. Accordingly, these findings suggest that household consumption behavior differs by household type (voluntary versus involuntary retirement). These three studies use log consumption as the dependent variable. Alternatively, Study 4 uses consumption growth as the dependent variable to test the retirement consumption puzzle. The regression results provide no evidence of a retirement consumption puzzle, finding an insignificant 3% increase in consumption after retirement. Advisors/Committee Members: Montalto, Catherine.

▼ Asset building has been proposed as a critical strategy to assist low-income households in exiting the cycle of poverty. With recent budget cuts at the federal level, the future of programs such as Individual Development Accounts is uncertain. As a result, this study was interested in exploring saving behavior among low-income households. Specifically, this research sought to understand these households by (1) determining asset difference between saving and non-saving households, (2) exploring factors related to saving behavior, and (3) identifying the effects of using different measures of saving. Through the application of the institutional theory of saving behavior, a framework is established for understanding determinants of savings among low-income households. Multiple survey years from the Survey of Consumer Finances were used to investigate the research questions through the use of means testing and logistic regression. Two different savings measurements were used: a broad measure and a narrow measure. The results indicate that saving households have greater levels of net worth, financial assets, and non-financial assets than non-saving households. Additionally, the results show that the institutional theory of saving has substantial explanatory power in understanding low-income saving behavior. Factors that significantly increase the likelihood of saving include owning a bank account, greater net worth, greater income, having a reason to save, having an employer-sponsored retirement plan, and having access to resources through family or friends. Factors that were associated with significantly lower likelihoods include being rejected or discouraged from a credit application, respondents of older ages, and responding in more recent survey years. Differences in significance, magnitude, and even direction of effects were observed between to the two measures of savings that were used. As a result, this study highlights the importance of the definition and measurement of key concepts. In terms of implications, helping households identify reasons to save and providing bank accounts should help increase saving rates. Social expectations also seem to be an important factor in saving behavior. Therefore, mentorship or peer counseling programs may be a plausible alternative to typical asset building programs. Policymakers should consider these findings when considering alternative programs and initiatives to help low-income households build assets. Future research directions are also discussed. Advisors/Committee Members: Hanna, Sherman D.

▼ This dissertation provides insights into definitional issues of small business owner-managers and which factors affect their financial vulnerability. In particular, the primary purposes of this dissertation are to: (1) provide a thorough review of the extensive literature on definitional issues of small businesses and their owners; (2) suggest more complete classifications of small businesses and new measures of financial vulnerability that are suitable for households who own or manage a small business; and (3) examine factors affecting the level of financial vulnerability of small business owner-manager households, based on three major aspects of household financial status: assets, income, and financial burden. This dissertation analyzes the factors affecting financial vulnerability of small business owner-managers using the 1992 to 2007 Surveys of Consumer Finances. The financial vulnerability of the owner-managers is measured by three financial ratios: the business asset ratio (BAR), the business income ratio (BIR), and the financial obligations ratio (FOR). This dissertation defines the business asset ratio (BAR) as the ratio of business assets to total household assets, the business income ratio (BIR) as the ratio of business income to total household income, and the financial obligations ratio (FOR) as the ratio of monthly household financial obligations to monthly household pre-tax income. These three ratios provide a measure of the level of diversification in assets, a measure of the level of diversification in household income, and a measure of the level of financial burdens, respectively. The factors to be tested are divided into three sub-categories: social-demographic factors, economic status factors, and attitudinal/expectation factors. Using ordinary least square (OLS) regression models and a logistic regression (Logit) model, this dissertation tests the effects of those factors on financial vulnerability and finds that several common factors such as household type, education attainment, self-employment status, home-ownership, income and net worth, and health insurance coverage are significantly related to financial vulnerability. In particular, household types, self-employment status, and health insurance coverage have statistically significant and have consistent effects on financial vulnerability in all three regression models. Compared to married households, single headed small business owner-managers are more likely to be financially vulnerable. Small business owner-managers with self-employment status are also more likely to be financially vulnerable, compared to those with other types of employment status such as salary earners, retirees, and unemployed. On the other hand, uninsured small business owner-managers tend to be less financially vulnerable. Advisors/Committee Members: Hanna, Sherman.

▼ The objective of this study is to determine whether financial literacy is able to moderate the effects of self-control on financial outcomes. Financial literacy is an oft cited solution to the myriad financial complexities faced by consumers. If financial literacy is effective it should help consumers overcome issues of self-control to encourage more fiscally responsible behaviors. Both economic and psychological theories of self-control are explored, and a conceptual model using the Big Five personality trait of conscientiousness as a measure of self-control is utilized. Data for this study come from the 1997 National Longitudinal Survey of Youth (NLSY) and the sample used in the study is comprised of 5,892 respondents. The measure of conscientiousness was collected in Round 13 as part of the Ten-Item Personality Inventory (TIPI). Financial literacy was assessed using three questions, collected in Round 11, on compounding interest, inflation, and stock risk. The five dependent variables modeled in this study are net worth, illiquid assets, liquid assets, credit card debt, and negative financial events. Multivariate linear and logistic regressions are used to analyze the data and an interaction term (financial literacy*conscientiousness) is used to test for moderating effects. Aside from education, conscientiousness is the most consistent predictor of positive financial behaviors. Those scoring high in conscientiousness have more net worth, illiquid assets, and liquid assets. They also have lower credit card debt and are less likely to have experienced more than one negative financial event, such as the use of payday loans or late mortgage/rent payments. A one standard deviation increase in conscientiousness is correlated with a 35% increase in net worth, a 24% increase in illiquid asset holdings, a 33% increase in liquid asset holdings, and a 14% reduction in credit card balances. A one standard deviation increase in conscientiousness decreases the likelihood of experiencing one or more negative financial events by 21%. Financial literacy is positively correlated with liquid and illiquid assets, though not associated with credit card debt, net worth, or negative financial events. A one standard deviation increase in financial literacy is correlated with a 27% increase in illiquid asset holdings and a 30% increase in liquid asset holdings. While financial literacy is not a significant predictor of net worth it is able to moderate the effect of conscientiousness on net worth. Likewise, financial literacy is able to moderate the effect of conscientiousness on illiquid assets. Financial literacy lessens the effect of conscientiousness on net worth, but strengthens its effect on illiquid assets. These findings suggest that both conscientiousness and financial literacy are important and that a dual emphasis on increasing conscientiousness and financial literacy is likely to have a positive impact on consumer finances. Based on the findings, implications are drawn for the use of educators, financial planners, policy makers, and consumers. Alternative approaches to financial literacy are suggested as a means to encourage better financial behaviors of consumers. These alternatives include a number of policy-based approaches including information disclosure, educational programs, planned choice architecture, product/service design, and product/service regulation. Advisors/Committee Members: Fox, Jonathan.

▼ With the burden of retirement planning shifting to the individual, individuals are responsible now more than ever to understand the complexities of retirement planning. Financial ratios can help simplify financial analysis and provide basic rule-of-thumb guidelines that can be applied to most households. The capital accumulation ratio (CAR), defined as the proportion of net worth held in investment assets, is intended to identify the share of assets held primarily for future consumption. This thesis explores the time trends of the capital accumulation ratio and considers whether changes in stock indexes relative to housing indexes might have an impact on the percentage of households that meet the 25% CAR threshold. The components that make up the ratio, investment assets and net worth, are discussed. In addition, a logistic regression is used to ascertain which factors are related to whether households will meet the threshold. The percentage of households meeting the 25% CAR threshold varies significantly between most of the survey years. In periods when the stock market increased more than housing prices (1992-1995, 1995-1998 and again from 2004-2007), the percentage of households meeting the 25% CAR threshold increases from the previous year. In periods when housing prices increased more than the stock market (1998-2001 and 2001-2004), the percentage of households meeting the threshold decreases from previous periods. Based on the multivariate regression, the difference between the years is significant for every period except 1995-1998. Education and income are positively related to meeting the guideline. Black, Hispanic and Asian/other households are less likely to meet the guideline than similar white households; unmarried couples and single households (male and female) are less likely to meet the guideline than married households; and households with a child under 19 at home are less likely to meet the guideline than households without a child under 19 at home. The likelihood of meeting the guideline increases with age until age 66.35 and then decreases. Advisors/Committee Members: Hanna, Sherman D.

▼ In this dissertation, I aim to clarify the factors affecting a consumers’ choice between the Internet and a financial planner for making saving and investment decisions, based on household production theory. Moreover, I explore the likelihood of an individual being an Internet user (vs. a non-user), a financial planner user (vs. a non-user), a mixed user (vs. a non-user), an Internet user (vs. a mixed user) or a financial planner user (vs. a mixed user). First, using the data from the combined set of 2001, 2004, and 2007 Survey of Consumer Finances (SCF), I investigated the proportion of U.S. households using the Internet, a financial planner, both, or neither. I found that Internet usage for making saving and investment decisions grew from 12% in 2001 to 20% in 2007. In contrast, financial planner usage statistics for the same purpose slightly decreased during the same period, from 18% to 15%. More interestingly, the proportion of mixed users, who use the Internet in addition to a financial planner, increased from 4% to 7%. Extending these results to multivariate analyses, I tested whether or not time constraints, monetary constraints, and human resource constraints affect a consumer’s choice between using the Internet and a financial planner. I found that monetary constraints and human resource constraints affected consumer decisions in choosing between the Internet and a financial planner, which supports household production theory. Unlike my hypothesis, however, time constraints (e.g., working hours per week, presence of a young child under the age of 5) did not bear any significant relationship in making a choice between the Internet and a financial planner. Moreover, the effects of time constraints were not found to be significant on the likelihood of being an Internet user, a financial planner user, and a mixed user. Overall, these results suggest that younger consumers with a Bachelor’s degree and less financial assets are more likely to use the Internet, instead of a financial planner or in addition to the financial planner. Advisors/Committee Members: Son, Jiyeon.

▼ Mothers with chronically ill children face the double burden of caregiving and employment to maintain and improve family financial well-being. This research aims to investigate the labor market behavior of mothers in response to the financial and time burden of caring for children with chronic conditions. An instrumental variable approach is used to deal with the potential endogeneity between the caregiving burden and mothers’ employment. This research also investigates how mothers’ employment decisions are affected by the caregiving burden of children at different age stages. This is the first study examining the age effects using the United States post welfare reform (Personal Responsibility and Work Opportunity Reconciliation Act) data. In addition, this research examines how mothers’ employment behavior varies by the interaction between caregiving burden and mothers’ couple status and by the interaction between caregiving burden and mothers’ race/ethnicity. To answer these questions, this research analyzes data from the 2003-2007 National Health Interview Survey (NHIS-Sample Child) and 2004-2008 Medical Expenditure Panel Survey (MEPS-Household Component). Consistent with the predictions of household production theory, a high financial burden is positively associated with mothers’ employment probability, and a high time burden is negatively associated with mothers’ employment probability. Interestingly with respect to part-time jobs, mothers facing a high time burden choose to work under 20 hours per week. Labor market decisions are shaped by the caregiving burden and demographic characteristics of both children and mothers. Some evidence of age effects and couple-status effects is found. Mothers with older children who more frequently use healthcare are less likely to be employed than those with younger children. Non-coupled mothers with high financial expenses are more likely to be employed than counterparts with partners. This result is consistent with the literature on the financial disadvantages faced by non-coupled mothers. Racial/ethnic differences were also found. Mothers in minority groups are more responsive to both financial and time burden of caring for children, and they adjust their employment behavior accordingly. In addition to wealth effects and discrimination effects, one explanation may be the cultural differences in valuing family and work across racial/ethnic groups. Given the significance of continuous employment on the long-term economic security of mothers and families, the findings of this research have important implications to policy makers, financial educators, and other service providers. Advisors/Committee Members: Stafford, Kathryn.