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A Theory of the Consumption Function, With and Without Liquidity Constraints (Expanded Version)

Carroll, Christopher D. - 2001

This paper argues that the modern stochastic consumption model, in which impatient consumers face uninsurable labor income risk, matches Milton Friedman's (1957) original description of the Permanent Income Hypothesis much better than the perfect foresight or certainty equivalent models did. The...

Persistent link: https://www.econbiz.de/10012470333

Precautionary Saving and the Marginal Propensity to Consume out of Permanent Income

Carroll, Christopher D. - 2001

The budget constraint requires that, eventually, consumption must adjust fully to any permanent shock to income. Intuition suggests that, knowing this, optimizing agents will fully adjust their spending immediately upon experiencing a permanent shock. However, this paper shows that if consumers...

Persistent link: https://www.econbiz.de/10012470491

Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis

Carroll, Christopher D. - 1996

This paper argues that the typical household's saving is better described by a "bufferstock" version than by the traditional version of the Life Cycle/Permanent Income Hypothesis (LC/PIH) model. Buffer-stock behavior emerges if consumers with important income uncertainty are sufficiently...

Persistent link: https://www.econbiz.de/10012473045

How Important is Precautionary Saving?

Carroll, Christopher D. - 1995

We estimate the fraction of the wealth of a sample of PSID respondents that is held because some households face greater income uncertainty than others. We first derive an equation characterizing the theoretical relationship between wealth and uncertainty in a buffer-stock model of saving. Next,...

Persistent link: https://www.econbiz.de/10012473685

The Nature of Precautionary Wealth

Carroll, Christopher D. - 1995

This paper uses the Panel Study of Income Dynamics to provide some of the first direct evidence that wealth is systematically higher for consumers with greater income uncertainty. However, the apparent pattern of precautionary saving is not consistent with a standard parameterization of the life...

Persistent link: https://www.econbiz.de/10012473686

Dissaving by the Elderly, Transfer Motives and Liquidity Constraints

Ando, Albert - 1993

Two explanations have been proposed for the observed slowness of wealth decumulation by the elderly in the literature: the precautionary saving induced by (uninsurable) uncertainty about the time of death or by the possibility of major catastrophes in old age that require large outlays; the...

Persistent link: https://www.econbiz.de/10012474371

Saving and Liquidity Constraints

Deaton, Angus - 1989

This paper is concerned with the theory of saving when consumers are not permitted to borrow, and with the ability of … such a theory to account for some of the stylized facts of saving behavior. When consumers are relatively impatient, and …

Persistent link: https://www.econbiz.de/10012475841

Intergenerational Transfers and Savings

Kotlikoff, Laurence J. - 1987

savings? Is it primarily accumulation for retirement as claimed by Albert Ando, Richard Brumberg, and Franco Modigliani in … their celebrated Life Cycle Model of Savings? Is it primarily intentional accumulation for intergenerational transfers? Or … is it primarily precautionary savings, much of which may be bequeathed because of imperfections in annuity markets? This …

Persistent link: https://www.econbiz.de/10012476831

Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis

Campbell, John Y. - 1986

The permanent income hypothesis implies that people save because they rationally expect their labor income to decline; they save "for a rainy day". It follows that saving should be at least as good a predictor of declines in labor income as any other forecast that can be constructed from publicly...

Persistent link: https://www.econbiz.de/10012477272

Social Security, Bequests, and the Life Cycle Theory of Saving : Cross-Sectional Tests

Blinder, Alan S. - 1981

tendency to decline with age, in apparent contradiction of the life-cycle theory of saving. However, a broadened concept of …") does decline more or less as predicted by the theory. No matter how they are defined, assets are a decreasing function of … issues econometrically, an equation for assets is developed from the strict life-cycle theory. The specification is …

Persistent link: https://www.econbiz.de/10012478504

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