State-level consumption exhibits excess sensitivity to lagged income to the same extent as US aggregate data, but state …-specific (idiosyncratic) consumption exhibits substantially less sensitivity to lagged state-specific income---a result that also holds for … reaction of consumption to idiosyncratic disposable income shocks even if it fails at the aggregate US level. Further analysis …

log consumption, assets, and labor income will be cointegrated. They conclude that this cointegrating relationship is …, assets, and labor income that are jointly consistent with an underlying budget constraint. By contrast, Lettau and Ludvigson …