Brittani Edge '14
Hometown: Seymour, TN
Senior Study Title: Expected Income and Consumption Habits of Undergraduate Students
Advisor: Dr. Shankar Ghimire
This study tests the consumption theories as suggested by economists such as Franco Modigliani and Milton Friedman which indicate that current consumption will be affected by future income expectations. Due to recent shifts in the economy caused by effects of the great recession, questions regarding the consumption habits of young people are particularly relevant at this time. The study uses surveys collected from 171 students at Maryville College, a small liberal arts college in Tennessee. The data were analyzed to predict a student’s current consumption based on various characteristics, including future income expectation. The study finds that students with higher future income expectation and higher GPA’s are more likely to consume in a higher bracket compared to their counterparts. In addition, the survey finds males are more likely to have higher future income expectations and consume in a higher bracket, consistent with the current wage gap found in the United States. This study shows strength in the theories of Modigliani and Friedman but also calls for further research in order to strengthen the findings in this demographic.
For Brittani Edge '14, completing her Senior Study in economics meant gaining quantifiable insight into the ways our expectations for the future shape the realities of our daily lives.
Using 171 of her classmates as research subjects, Edge found that students with higher GPAs and future income expectations are likely to consume more freely than their counterparts.
An economics major who is now pursuing a master's degree in natural resource economics at the University of Tennessee in Knoxville, she intends to complete a Ph.D.
The idea for her Senior Study came to Edge during a macroeconomics course she took during her junior year. As part of that course, students built several different economic models, one of which estimated consumption.
"There are many different ways to model consumption, and wealth expectation is one of them," she said. "I became interested in wealth expectation immediately, looking at the examples I saw around me. Were my art major friends spending less than my biochemistry major friends? Did I spend more than people in the same major who planned on going into nonprofit work?"
According to Dr. Shankar Ghimire, visiting assistant professor of economics, Edge's study was exemplary because of the ambition and tenacity it demonstrated.
"Testing a complicated macroeconomic theory is a challenge," he said. "The nature of Brittani’s data was not something to which you could apply a simple linear regression analysis. We had to spend quite a bit of time together to get ordinal regression as the right method that would work properly for what she wanted to do."
Ghimire went on to say that Edge's thesis idea originated from a very popular macroeconomic theory which states that a subject's current consumption depends on what he or she expects to earn in the future. Renowned economists such as Milton Friedman and Franco Modigliani have studied this relationship, albeit always on a large scale.
"Of course it is a very popular topic, but what Brittani does is she takes it to a small-scale setting. It's a new perspective for me as well," Ghimire said.
Edge was very complimentary of her advisor's teaching, saying that he provided her with the resources she needed to complete this difficult task. However, she pointed out that he did not "simply tell [her] what to do."
In the process of completing her Senior Study, Edge learned a lot about the challenges researchers face in collecting data. Often surveys were filled out incompletely or incorrectly, making data analysis difficult.
In the end, however, she was able to collect the data she needed, and it reflected significant national trends. She found, for instance, that male students generally expected higher future income and consumed more in the present, something she attributes to the well-documented wage gap in the United States.
She pointed out in her study that, given the economic shifts caused by the recent recession, the consumption habits and future income expectations of young people are particularly relevant.
Ghimire said that Edge's Senior Study summarized what she learned during her undergraduate experience, "put everything together in one place" and has prepared her well for graduate school.
"She completed this whole research project, and research will be her main focus in graduate school," he said. "She exactly knows what is coming up, and I am confident she will accomplish it very well."
Edge pointed out that the challenges she faced while completing her Senior Study left her with a solid understanding of the value of persistence in research.
"My goal is to work in the field of economic development," Edge said. "Ultimately, I'd like to work internationally, but I am also interested in doing work in communities around Appalachia. I chose to pursue a master's in natural resource economics because of the close relationship between natural resources and economic development."