A reconciliation of two alternative approaches towards buffer stock saving

This paper shows that the two main models in the buffer stock saving literature can be nested in a model that varies the level of available social insurance. Equivalently, the assumption about the time series process for labor income (and social insurance during unemployment) is crucial in determining the level (but not the shape) of optimal consumption as a function of liquid wealth.

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Year of publication:	2003-04
Authors:	Michaelides, Alexander
Institutions:	London School of Economics (LSE)
Subject:	buffer stock saving \| precautionary savings motive \| liquidity constraints \| unemployment benefit

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Extent:	application/pdf
Series:	LSE Research Online Documents on Economics.
Type of publication:	Book / Working Paper
Notes:	Published in Economics Letters, April, 2003, 79(1), pp. 137-143. ISSN: 0165-1765
Classification:	D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving ; E21 - Consumption; Saving
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010745934