The Korean Journal of Economic Studies
Decomposition of Consumption Propensity Change
Ki-baeg Park (The University of Seoul)Year 2017Vol. 65No. 1
AbstractThis study examines the factors explaining the decline in consumptionpropensity with 2006 and 2014 data of the ‘Household Income and ExpenditureSurvey’. The Shapley method is applied for factor decomposition. Theproportion of subsidized products such as public education and welfare(childcare) is 24.0%, and the proportion of products controlled by governmentsuch as communication service and tobacco is 30.2%. Heating and fuel costs,which may be affected by the drop in international oil prices, account for16.3% of the decline in consumption propensity. However, the expenditurerelated to food accounts for 36.78% of the decline in consumption propensity,so that the households are suppressing consumption for the future.While changes in income distribution, age of the household head, and thenumber of householders do not explain the decline, the decrease of generalhouseholds, coupled with the hike of elderly households, accounts for 77.4%of the decline. The impact of changes in taxes and public transfer income,including social insurance premiums, on average consumption propensity isunclear.