A life-cycle approach to the intertemporal elasticity of substitution
We construct a three-period model spanning 30 years of an optimizing consumer's life. Exploiting the first-order conditions, we derive expressions for the intertemporal elasticity of substitution (IES) that allow for different utility specifications; the case of isoelastic utility is a special case. We fit US household data on income, consumption, and net worth to the IES expressions to obtain point estimates of the IES. We also construct 95 percent confidence intervals, based on 10,000 simulated observations. Our evidence suggests that the value of the IES is likely between 0.2 and 0.8.
Year of publication: |
2008
|
---|---|
Authors: | Biederman, Daniel K. ; Goenner, Cullen F. |
Published in: |
Journal of Macroeconomics. - Elsevier, ISSN 0164-0704. - Vol. 30.2008, 1, p. 481-498
|
Publisher: |
Elsevier |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
A life-cycle approach to the intertemporal elasticity of substitution
Biederman, Daniel K., (2008)
-
A life-cycle approach to the intertemporal elasticity of substitution
Biederman, Daniel K., (2008)
-
A strictly-concave, non-spliced, Giffen-compatible utility function
Biederman, Daniel K., (2015)
- More ...