Recent empirical studies have found that consumption is more sensitive to current income than simple versions of the life-cycle, permanent income hypothesis would predict. The present paper studies a model in which the fraction of consumers exhibiting excess sensitivity is endogenously...

In this Economic Letter, we report on research that takes advantage of newly available international data and examines in some detail the wealth effect in three countries, Canada, Finland, and Italy (Sierminska and Takhtamanova 2007). First, we investigate whether consumption responds...