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Tiểu luận tiếng anh Kinh tế chuyển nhượng the factors affecting monthly expenditure of FTU's studen
Econometrics AssignmentTABLE OF CONTENTSPageI. INTRODUCTION .1II. METHODOLOGY 21. DEFINITION 21.1. Income 21.2. Expenditure .32. THEORIES OF CONSUMERS’ BEHAVIOR .33. THE KEYNESIAN CONSUMPTION FUNCTION 5III. ECONOMETRIC MODEL .71. MODEL CONSTRUCTION 72. COEFFICIENTS PREDICTION 8IV. DATA DESCRIPTION 9V. EMPERICAL RESULTS 131. USING THE ABOVE DATA TO ESTIMATETHE REGRESSION MODEL BY OLS METHOD .132. MEANING OF THE REGRESSION COEFFICIENTS .143. TESTING THE SIGNIFICANCE OF THEREGRESSION COEFFICIENTS AND THERELEVANCE OF THE REGRESSION FUNCTION 144. FIRST CURE: FOR THE REGRESSION MODEL .175. TESTING THE CONFORMITY WITH THE ASSUMPTIONS OF OLS METHOD .216. SECOND CURE: FOR THE HETEROSKEDASTICITY 237. FINAL REGRESSION MODEL 28VI. CONCLUSION .29VII. REFERENCES .30- 1 - Econometrics AssignmentI. INTRODUCTIONVietnam in recent years, along with nearly 200 countries around the world, has been integrating into the trend of globalization and exercising national campaigns towards the overall development in economic, political, social and cultural aspects. In this context, human capital is considered one of the key factors for Vietnam’s long-term revolution, and it is university students that make up an indispensable part in the domestic labor force in the future.Regarded as one of the most privileged universities in Vietnam, Hanoi Foreign Trade University has long attracted thousands of students from North to South every year. Each student, as a matter of fact, has his own family background, distinctive personalities as well as certain level of knowledge and experience. Such factors, certainly, have significant impacts on students’ daily life, in which students’ expenditure should be mentioned first of all. Therefore, after taking everything into consideration, we decided to choose and study the project: “THE FACTORS AFFECTING MONTHLY EXPENDITURE OF FTU’S STUDENT”. Although the government has tried to implement financial aid programs for university learners, we, especially those coming from provincial areas, have still met many difficulties in managing our spending every day. It is really not easy to allocate our limited source of money into a range of activities in the most effective way. Thus through our project, we would like to provide you with more in-depth understanding about some main factors dominating daily spending of FTU’s students. We hope that arguments and statistics in this project will be helpful for you in drawing a reasonable plan of expenditure for the time being.- 2 - Econometrics AssignmentII. METHODOLOGYIn this project, we consider three factors that may affect students’ monthly spending: income, students’ homeland and students’ characteristics.Homeland and characteristics are two qualitative variables. In general they have certain impacts on the ways students plan their expenditure. For instance, a student coming from rural area may consume less than one coming from a big city. Similarly, the amount of spending depends on whether the student is generous or thrifty, shopping-lover or shopping-averse.Income, by contrast, is a quantitative variable. It can be said that income and expenditure are two critical elements of the market economy, as everyone has to consider how to spend their disposable income in the most reasonable way. There also exists a close-knit relationship between those two factors, thus we will use microeconomic and macroeconomic theories and models to interpret it. 1. DEFINITIONS1.1. IncomeThere are two main types of income, which can be listed as personal income and disposable income.1.1.1. Personal income (PI)Personal income is the income earned by households and non-corporate businesses. Unlike national income, it excludes retained earnings, which is the amount of revenue corporations have earned but have not paid out to stockholders as dividend. It also subtracts corporate income taxes and contributions for social insurance (mostly Social Security taxes). In addition, personal income includes interest income, the amount households receive from their holdings of government debt, and transfer payment, the amount they get form government transfer program such as welfare and social security.- 3 - Econometrics Assignment1.1.2. Disposable income (DI)Disposable personal income is the net income that households and non-corporate businesses earn after fulfilling all their obligations to the government. It equals personal income minus personal taxes and certain non-tax payments (such as traffic tickets). DI = PI – personal taxesIn the scope of our project, however, our studied subjects are FTU’s students who have no obligation to pay income tax. Thus they have entire disposal of what they earn, which means that their personal income also equals their disposable income. Besides, students’ earnings generally come from two main sources: family financial support and income from part-time jobs. Family financial support is the monthly amount supported by students’ families so that they can fulfill their daily life. Income from part-time jobs is what students earn when participating in the labor market, which is tax-free.1.2. ExpenditureExpenditure is the sum of money each individual uses for the purchase of goods and services to satisfy their needs. For instance, each month students have to pay for some urgent needs such asfood, clothing, traveling fees, housing expenses (if students have to rent a house), and so on. Those all aim at responding to personal needs of students. 2. THEORIES OF CONSUMERS’ BEHAVIOR• We assume that university students always try to maximize their own utility by using a number of certain resources. This means that although there are many ways of planning expenditure, students will only follow the choice that is most likely to optimize their satisfaction. Moreover, as there always exists - 4 - Econometrics Assignmenta limit to students’ income, they have to consider how to allocate that restricted source for a variety of daily activities. In short, this part of our project has two main objectives. The first one is to study how students use their income to bring about maximum benefit for themselves. And the second one is to explain how income affects expenditure theoretically and realistically. • The theories of consumers’ behavior, in microeconomics, begin with three basic assumptions about consumers’ preference. Firstly, preferences are complete. This means that consumers can rank their baskets of goods based on personal preferences or different levels of utility they may provide. Prices of goods have no effects on consumers’ choice in this case. Secondly, preferences are transitive. If a person prefers good A to good B, and good B to good C, certainly he will prefer good A to good C. Thirdly, in case of normal goods, consumers always prefer more to less. This is an obvious argument, because everyone feels more satisfied when consuming more goods and services.• Generally our project still relies on those basic assumptions, but instead of goods, we aim to study different ways of planning expenditure of FTU’s students. Thus in the scope of this project, we will adjust the three assumptions as follows.Firstly, students can compare and rank different choices of spending based on their satisfaction.Secondly, of a student prefers choice A to choice B, and choice B to choice C, this means that he prefers choice A to choice C.Thirdly, students will choose the choice of expenditure that benefits them most.- 5 - Econometrics Assignment3. THE KEYNESIAN CONSUMPTION FUNCTIONIn general, the basic form of consumption function is as follows:C = f(Yd)with Yd representing disposable income. But as afore-mentioned, since there is no personal income tax levied on university students, their disposable income also equals their personal income. In this case, the consumption function can be rewritten as : C = f(Y)This reflects the relationship between planned expenditure and disposable income. Generally students’ spending increases when income increases, but it is assumed to rise less quickly than income. The reason is that students tend to divide their earnings into two parts: consumption and savings. This means that they do not spend all their money on the purchase of goods and services but tend to save a small amount to deal with unexpected incidents in the future, such as illnesses, burglaries, house-moving, etc. This is a popular psychological phenomenon of almost every student in Vietnam, especially those coming from provincial areas to big cities to further their study. If consumption rises at a lower speed than income does, the ratio consumption/income will decrease as income increases. We use a linear function in the form of y = a + bx to build the consumption function.In particular, we have the standard Keynesian consumption function as follows:1( ) .C f Y C MPC Y= = +where C = Students’ expenditure- 6 - Econometrics AssignmentC= Autonomous consumption. This is the level of consumption that will take place even if income is zero. If an individual's income falls to zero, some of his existing spending can be sustained by using savings. This is known as dis-saving spending. MPC = Marginal propensity to consume. This is the change in consumption divided by the change in income, or in other words, it determines the slope of the consumption function. The MPC reflects the effect of an additional VND of disposable income on consumption. CMPCY∆=∆As you can see from the graph above, we always have: 0 < MPC < 1. If MPC equals to 1, this means that students’ spending always equals students’ income, which is irrational in reality. Actually when a student’s income reaches a certain level, he will not spend all the money but keep a certain amount as savings. Certainly, savings will increase as income increases, thus MPC can never equal to 1. - 7 - Econometrics AssignmentIn conclusion, there is a positive relationship between disposable income (Yd) and students’ spending (C). The gradient of the consumption curve gives the marginal propensity to consume. The intercept gives the autonomous consumption, which exists even if students have no current disposable income.III. ECONOMETRIC MODEL1. MODEL CONSTRUCTIONa) Variables:- Dependent variable: EXP: Student’s monthly expenditure (unit: thousand dong)- Independent variables:+ CHA (dummy): Student’s characterGenerous = 1Economical = 0+ HOM (dummy): Student’s homelandUrban area = 1Rural area = 0+ FFS: Family financial support (unit: thousand dong)+ INC: Student’s monthly income (from tuition, part-time jobs, etc) (unit: thousand dong)b) Regression model:- Population regression function:- 8 - Econometrics Assignment(PRF): 1 2 3 4 5. . . .i i i i i iEXP CHA HOM FFS INC Uβ β β β β= + + + + +(Ui: disturbance term)- Sample regression function:(SRF): 1 2 3 4 5ˆ ˆ ˆ ˆ ˆ. . . .i i i i i iEXP CHA HOM FFS INC eβ β β β β= + + + + + (ei: residual)2. COEFFICIENTS PREDICTION- 2β: positive – A generous student (CHA = 1) tends to spend more than an economical one (CHA = 0)- 3β: positive – A student who comes from an urban area (HOM = 1) tends to spend more than one who comes from a rural area (HOM = 0)- 4β: positive – If monthly family financial support increases, student’s monthly expenditure increases too.- 5β: positive – If a student’s monthly income increases, his/her expenditure increases too.IV. DATA DESCRIPTION- 9 - Econometrics AssignmentThe primary data is collected from a survey which has been conducted among 83 FTU students in April 22, 2011. The dataset is interpreted as cross-sectional. The results of the survey has been obtained as follows:No CHA HOM FFS INC EXP1 1 0 2000 0 20002 1 1 2000 0 20003 1 0 1500 0 15004 0 1 2000 0 20005 1 1 1000 0 10006 1 1 1500 0 15007 0 1 400 0 4008 1 1 500 0 5009 1 1 600 0 60010 1 0 2500 500 300011 1 1 1500 500 200012 1 1 0 2000 150013 1 1 2000 0 200014 1 0 500 1500 300015 1 1 2000 0 150016 1 0 3000 900 370017 1 1 300 1000 130018 0 1 1000 0 90019 0 1 500 0 50020 1 0 1500 0 1500- 10 - [...]... sides of the function by FFS The results show that heteroskedasticity has not been cured Then again we divide both sides of the function by INC This time we obtain the final regression function - Eventually, the final regression model is significant and appropriate and meet all the assumptions of OLS R2 = 0.941516 means that the regression function can explain about 94.15% the student’s monthly expenditure. .. that every month if the income of one student increases (or decreases) by one thousand dong, he/she will spend 0.816912 thousand dong more (or less) on average; provided that his/her character and monthly family financial support remain unchanged e) Testing the significance of the regression coefficients and the relevance of the regression function: - Slope β 2 : H 0 : β2 = 0 Hypothesis : H1 : β... income • The brief steps of constructing the appropriate model: - First, there exists inappropriate variables in the original regression function This problem is cured by omitting two variables: X1 = 1 and HOM - 28 - Econometrics Assignment - Second, the above-derived function has heteroskedasticity problem This can be cured by dividing both sides of the function by either of these two variables: FFS... homeland and monthly income remain unchanged ˆ - β5 = 0.81998 means that every month if the income of one student increases (or decreases) by one thousand dong, he/she will spend 0.81998 dong more (or less) on average; provided that his/her character, homeland and monthly family financial support remain unchanged 3 TESTING THE SIGNIFICANCE OF THE REGRESSION COEFFICIENTS AND THE RELEVANCE OF THE REGRESSION... = 0.003530 From the above analysis: nR2 = 83 x 0.255030 = 21.167482 > χ 2 0.05 (k − 1) = χ 2 0.05 (8 − 1) = 14.0671 p-value = 0.003530 < 0.05 Therefore, we reject H0 There is insufficient sample evidence to claim that the regression model is homoskedastic In other words, there exists heteroskedasticity 6 SECOND CURE: FOR THE HETEROSKEDASTICITY Two variables FFS and INC are the cause of heteroskedasticity... have difficulty in dividing both sides of the function by any independent variables This results from the fact that some of the observations for the variables FFS and INC may have value zero (xi = 0) However, Gretl has automatically omitted these incomplete observations and done analysis in a quite accurate way To some extent, the problems have been cured and we get the most suitable regression model VII... From the above analysis and results, some conclusions are obtained as follows: • The variables newCHA and newFFS have impact on newEXP However, both newCHA and newFFS depend on CHA, FFS and INC; and newEXP depends on EXP Thus, generally EXP depends on CHA, FFS and INC In other words, a student’s monthly expenditure depends on his/her character, monthly family financial support and monthly income • The. .. between variable j and the other independent variables Properties of matrix X'X: 1-norm = 223.38933 Determinant = 0.042566825 Reciprocal condition number = 5.7550166e-008 From the above analysis, since VIF(i) < 10, we can claim that multicollinearity does not exist + Conclusion: Multicollinearity does not exist - Testing the relevance of the regression function (4) H 0 : R2 = 0 Hypothesis : 2 H1... regression function is relevant 4 FIRST CURE: FOR THE REGRESSION MODEL a) The coefficient β3 and the variable HOM: ˆ - From the above analysis, when conducting T-test with respect to β3 , we have sufficient evidence to conclude that β3 = 0 , that is, the slope is not significant - 17 - Econometrics Assignment - If the variable HOM is omitted, we obtain the following result when running a regression model... REGRESSION FUNCTION a) The significance of the regression coefficients: - Intercept β1 : H 0 : β1 = 0 Hypothesis : H1 : β1 ≠ 0 Formula: t = ˆ β1 − 0 −23.7348 − 0 = = −0.2209 ˆ 107.466 SE ( β1 ) If α = 0.1 , then t0.05 (78) = 1.66 - 15 - Econometrics Assignment Since | t | = 0.2209 < t0.05(78) = 1.66, we accept H0 There is sufficient sample evidence to claim that β1 = 0 , that is, the intercept is not