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Author: Orazio P. Attanasio Publisher: ISBN: Category : Consumption (Economics) Languages : en Pages : 54
Book Description
The main aim of this paper is to assess the validity of the life cycle model of consumption. In particular, we address an issue that has recently received much attention, especially in the macroeconomic literature: that of "excess sensitivity" of consumption growth to income growth. We do this using a time series of cross sections and a novel and flexible parameterization of preferences. The former allows us to' address aggregation issues directly, while with the latter we can allow both the discount factor and the elasticity of intertemporal substitution eis to be affected by various observable variables and lifetime wealth. The main findings can be summarized as follows: (i) the excess sensitivity of consumption growth to labor income disappears when we control for demographic variables. This is true both at life cycle and business cycle frequencies. (ii) estimation of a flexible specification of preferences indicates that the elasticity of intertemporal substitution is a function of several variables, including the level of consumption. The eis increases with the level of consumption, as expected. (iii) the variables that change the eis are also important in explaining why we observe excess sensitivity over the business cycle. (iv) we are able to reconcile our results with those reported both in the macro and micro literature. (v) in our specification the elasticity of intertemporal substitution is not very well determined. This result, however, should be taken with care, as we have not made an effort to construct a 'preferred' specification, which would probably include additional controls for labor supply behavior. The evidence presented shows that the life cycle model cannot be easily dismissed. Indeed, we believe that the model does a good job at representing consumption behavior both over the life cycle and over the business cycle.
Author: Orazio P. Attanasio Publisher: ISBN: Category : Consumption (Economics) Languages : en Pages : 54
Book Description
The main aim of this paper is to assess the validity of the life cycle model of consumption. In particular, we address an issue that has recently received much attention, especially in the macroeconomic literature: that of "excess sensitivity" of consumption growth to income growth. We do this using a time series of cross sections and a novel and flexible parameterization of preferences. The former allows us to' address aggregation issues directly, while with the latter we can allow both the discount factor and the elasticity of intertemporal substitution eis to be affected by various observable variables and lifetime wealth. The main findings can be summarized as follows: (i) the excess sensitivity of consumption growth to labor income disappears when we control for demographic variables. This is true both at life cycle and business cycle frequencies. (ii) estimation of a flexible specification of preferences indicates that the elasticity of intertemporal substitution is a function of several variables, including the level of consumption. The eis increases with the level of consumption, as expected. (iii) the variables that change the eis are also important in explaining why we observe excess sensitivity over the business cycle. (iv) we are able to reconcile our results with those reported both in the macro and micro literature. (v) in our specification the elasticity of intertemporal substitution is not very well determined. This result, however, should be taken with care, as we have not made an effort to construct a 'preferred' specification, which would probably include additional controls for labor supply behavior. The evidence presented shows that the life cycle model cannot be easily dismissed. Indeed, we believe that the model does a good job at representing consumption behavior both over the life cycle and over the business cycle.
Author: B. Douglas Bernheim Publisher: University of Chicago Press ISBN: 9780226044040 Category : Business & Economics Languages : en Pages : 408
Book Description
"... Papers presented at a conference held at the Stouffer Wailea Hotel, Maui, Hawaii, January 6-7, 1989. ... part of the Research on Taxation program of the National Bureau of Economic Research." -- p. ix.
Author: Ms.Valerie Cerra Publisher: International Monetary Fund ISBN: 1513536990 Category : Business & Economics Languages : en Pages : 50
Book Description
Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.
Author: Robert Shimer Publisher: Princeton University Press ISBN: 1400835232 Category : Business & Economics Languages : en Pages : 189
Book Description
Labor Markets and Business Cycles integrates search and matching theory with the neoclassical growth model to better understand labor market outcomes. Robert Shimer shows analytically and quantitatively that rigid wages are important for explaining the volatile behavior of the unemployment rate in business cycles. The book focuses on the labor wedge that arises when the marginal rate of substitution between consumption and leisure does not equal the marginal product of labor. According to competitive models of the labor market, the labor wedge should be constant and equal to the labor income tax rate. But in U.S. data, the wedge is strongly countercyclical, making it seem as if recessions are periods when workers are dissuaded from working and firms are dissuaded from hiring because of an increase in the labor income tax rate. When job searches are time consuming and wages are flexible, search frictions--the cost of a job search--act like labor adjustment costs, further exacerbating inconsistencies between the competitive model and data. The book shows that wage rigidities can reconcile the search model with the data, providing a quantitatively more accurate depiction of labor markets, consumption, and investment dynamics. Developing detailed search and matching models, Labor Markets and Business Cycles will be the main reference for those interested in the intersection of labor market dynamics and business cycle research.
Author: Gilbert R. Ghez Publisher: Columbia University Press ISBN: Category : Business & Economics Languages : en Pages : 180
Book Description
There is a belief now that family behavior over the life cycle can be analyzed by economic methods. This study deals with allocation of resources by families over time.
Author: Calogero Brancatelli Publisher: ISBN: Category : Business cycles Languages : en Pages : 35
Book Description
This paper revisits the effects of income changes on consumption of private households by focusing on a commonly disregarded and yet sizeable component of household expenditures: consumption of food and non-food consumer packaged goods. We exploit a new data source from the Netherlands that combines on the level of individual households administrative data from tax records with household scanner data, thus minimizing measurement error for both expenditures and the key explanatory variable, household disposable income. Even after controlling for differences in needs and for consumption volume, we document significant variation in expenditures and thereby reveal substantial scope for potential savings. Still, even though the Netherlands experienced a recession and a subsequent recovery in the analysed period from 2011 to 2018, we find only an economically small relationship with income, which is also not higher for households with low income or low liquidity. Despite remaining small in magnitude, we document inter alia a much higher coefficient for single households. We can exclude various potentially confounding effects as we show that retailers practice national pricing and as we control for sample composition and potential substitution between in-house and out-of-house consumption.
Author: Pierre-Olivier Gourinchas Publisher: ISBN: Category : Consumption (Economics) Languages : en Pages : 62
Book Description
This paper employs a synthetic cohort technique and Consumer Expenditure Survey data to construct average age-profiles of consumption and income over the working lives of typical households across different education and occupation groups. Using these profiles, we estimate a structural model of optimal life-cycle consumption expenditures in the presence of realistic labor income uncertainty. The model fits the profiles quite well. In addition to providing tight estimates of the discount rate and risk aversion, we find that consumer behavior changes strikingly over the life-cycle. Young consumers behave as buffer-stock agents. Around age 40, the typical household starts accumulating liquid assets for retirement, and its behavior mimics more closely that of a certainty equivalent consumer. This change in behavior is mostly driven by the life-cycle profile of expected income. Our methodology provides a natural decomposition of saving into its precautionary and retirement components.
Author: Martin Gervais Publisher: London : Department of Economics, University of Western Ontario ISBN: 9780771421037 Category : Languages : en Pages : 39
Author: Tullio Jappelli Publisher: Oxford University Press ISBN: 0199383170 Category : Business & Economics Languages : en Pages : 313
Book Description
Consumption decisions are crucial determinants of business cycles and growth. Knowledge of how consumers respond to the economic environment and how they react to the risks that they encounter during the life-cycle is therefore important for evaluating stabilization policies and the effectiveness of fiscal packages implemented in response to economic downturns or financial crises. In The Economics of Consumption, Tullio Jappelli and Luigi Pistaferri provide a comprehensive examination of the most important developments in the field of consumption decisions and evaluate economic models against empirical evidence. The first part of the book provides the basic ingredients of economic models of consumption decisions. The central part reviews the empirical literature on the effect of income and wealth changes on consumption and on the relevance of precautionary saving and credit market imperfections. The last chapters extend the basic framework to such important areas as bequests, leisure, lifetime uncertainty, and financial sophistication. Jappelli and Pistaferri shed light on important issues, including how consumption responds to changes in economic resources, how economic circumstances and consumers' characteristics influence behavior, and whether consumption inequality depends on income shocks and their persistence.
Author: Mark Gertler Publisher: Mit Press ISBN: 9780262072632 Category : Business & Economics Languages : en Pages : 489
Book Description
The NBER Macroeconomics Annual presents pioneering work in macroeconomics by leading academic researchers addressed to a broad audience of public policymakers as well as to the academic community. Each paper is followed by comments and discussion to give a more complete context for the views expressed. The 2004 edition features a range of papers aimed at providing coherent and informative answers to such important questions as the effect of federal government debt on interest rates; the stochastic dimension of the American economy; the role of technology as a source of economic fluctuations; and the interaction of capital flows, fiscal policy, and monetary policies in developing countries, emerging markets, and OECD countries.
Author: Orazio P. Attanasio
Author: Orazio P. Attanasio
Author: B. Douglas Bernheim
Author: Ms.Valerie Cerra
Author: Robert Shimer
Author: Gilbert R. Ghez
Author: Calogero Brancatelli
Author: Pierre-Olivier Gourinchas
Author: Martin Gervais
Author: Tullio Jappelli
Author: Mark Gertler