, income, and wealth. We then contrast RI with habit formation and show that the two models make very different general …

consumption expenditures. As a result, tests of standard theories of consumption (such as the Permanent Income Hypothesis, or PIH … goods and services to measures of real income and wealth, where the latter are deflated by a price index for total … consumption expenditures. We demonstrate that this procedure is only valid under the assumption that real consumption of …