Abstract:
The purpose of this paper is to study the sticky consumption growth behavior of Thai households which implies the sign of incomplete information and habit formation behavior. This behavior makes sluggishness in consumption growth and has an effect on consumption behavior of household inconsistent with Life Cycle-Permanent Income Hypothesis. The data from Household Socio-economic Survey over the period 1988-2004 are used to construct the pooled cross-sectional time-series data. These data are used to test the sticky consumption growth behavior based on the consumption expenditure data, which are total expenditure, expenditure on goods, expenditure on services and expenditure on durable goods. The Seemingly Unrelated Regression (SUR) method was also applied to estimate the coefficient of regression. The results of the study show that Thai households do not have the sticky consumption growth behavior but their behavior are inconsistent with Life Cycle-Permanent Income Theory because the growth of consumption has a significant relationship with the growth of lag consumption in opposite way. It implies that the household choose the consumption level to maximize their utility in the present although the consumption level in the future must be reduced. Nonetheless, the results show that income growth affects preset consumption growth therefore government should take factor that affect income growth into consideration to stimulate consumption expenditure of household.