Doctor of Philosophy, The Ohio State University, 2014, Human Ecology: Family Resource Management

With increasing income uncertainty during the Great Recession, many households might have had difficulty in projecting future income changes. Ideally, a household should consider lifetime wealth and the distinction between transitory and permanent income changes in making saving decisions, but during the Great Recession it was probably very difficult for households to identify which income changes were transitory. Gain-loss utility based on prospect theory assumes that household inter-temporal decisions are determined not only by current or permanent income but also by their own expectations or assessment about income and income uncertainty in the first period. In this study, how households' perception of their past and future income compared to reference points in the first period and how households' perception of their income uncertainty change affect saving decisions in the second period and between the periods were examined with estimates of future income change. Saving decisions were tested based on relative gain and loss utility using loss aversion theory of consumption and a two period model. Possible asymmetric saving responses between positive and negative changes in reference dependent income and uncertainty were also analyzed. The 2007 and 2009 Survey of Consumer Finances (SCF) panel dataset was used. Both total and subsamples were analyzed based on the expected income change measure to identify possible asymmetry of saving in response to a set of reference dependent income and uncertainty variables, such as deviation from normal income, expected income change, and income uncertainty change, as well as the effect on saving measured in two ways, savings between 2007 and 2009 and whether or not saved in 2009. This study found a set of reference dependent income and uncertainty variables had significant effects on saving decisions of households and asymmetric saving responses between negative and positive changes in those variables. H (open full item for complete abstract)

Committee: Kathryn Stafford (Advisor); Sherman Hanna (Committee Member); Robert Scharff (Committee Member) Subjects: Home Economics