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consumption-saving behavior. We construct a novel consumption-saving model where the household must infer the persistent component … marginal propensity to consume because the short run covariance between income growth and consumption growth increases when … can be identified from panel data on income and consumption. Finally, we estimate a high degree of knowledge in the Panel …
Persistent link: https://www.econbiz.de/10012928282
In this paper we examine the link between wage inequality and consumption inequality using a life cycle model that … incorporates household consumption and family labour supply decisions. We derive analytical expressions based on approximations for … the dynamics of consumption, hours, and earnings of two earners in the presence of correlated wage shocks, non …
Persistent link: https://www.econbiz.de/10011605701
We show that the optimal consumption of an individual over the life cycle can have the hump shape (inverted U …, an impatient individual would prefer a decreasing consumption path over life. However, because of habit formation, a high … initial consumption would lead to high required consumption in the future. To cover the future required consumption, wealth is …
Persistent link: https://www.econbiz.de/10010225961
Exponential-growth bias (EGB) is the tendency for individuals to partially neglect compounding of exponential growth. We develop a model wherein biased agents misperceive the intertemporal budget constraint, and derive conditions for overconsumption and dynamic inconsistency. We construct an...
Persistent link: https://www.econbiz.de/10013036519
We study the cyclical dynamics of consumption in the euro area (EA) and the large EA countries by distinguishing … cross-country heterogeneity in how different factors (including durable-specific ones) explain consumption; (iii) the … strength of spillovers from durable to nondurable consumption, as predicted by theory, is empirically correlated with how much …
Persistent link: https://www.econbiz.de/10012197836
households are tempted to consume their liquid wealth but can use illiquid housing as a savings commitment device. The importance … of temptation and commitment is identified using data on consumption, liquid assets, and housing wealth over the life … need for commitment. Preference for illiquidity has important implications for the consumption response to unexpected …
Persistent link: https://www.econbiz.de/10012028063
Utilizing the asset pricing framework, we justify S-shaped consumption utility functions by reconciling realized … consumption with asset returns. The S-shaped consumption utility predicts a possible negative correlation between asset returns … and lower quantiles of consumption growth, for which we find evidence from micro-level data. This evidence refutes a …
Persistent link: https://www.econbiz.de/10014258436
proposed. These expectation adjustments generate highly heterogenous consumption responses to income windfalls: many households … previous explanations for these effects, including consumption adjustment cost and liquidity constraints. At the aggregate … level, consumption is less sensitive to expansionary policies during recessions and its excess smoothness varies …
Persistent link: https://www.econbiz.de/10013256389
Various deviations from the Permanent Income consumption model with rational expectations have been discussed in the … literature, including loss aversion and liquidity constraints. In the existing literature, these two types of consumption … asymmetry are usually considered as mutually exclusive. Using a single data set for US personal consumption, income and wealth …
Persistent link: https://www.econbiz.de/10009306633
the consumption level of all households who are perceived to be richer, on household savings and consumption. When … data from the German Socio-Economic Panel, we estimate the causal effect of changes in reference consumption, defined as … controlling for own income, an increase in reference consumption of 100 euros leads to an increase in consumption of 10 to 25 …
Persistent link: https://www.econbiz.de/10010190171