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Abstract

This paper compares implications of three kinds of models of households' consumption behavior: the basic permanent-income model, several models of liquidity-constrained households, and a model of an informationally-constrained efficient contract. These models are distinguished in terms of implications regarding the present discounted values of net trades to households at various levels of temporary income, and the households' marginal rates of substitution. Martingale consumption is studied as an approximation to the predicted consumption process of the efficient-contract model. Copyright 1991 by The Review of Economic Studies Limited.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Review of Economic Studies.

Volume (Year): 58 (1991)
Issue (Month): 5 (October)
Pages: 883-99

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Handle: RePEc:bla:restud:v:58:y:1991:i:5:p:883-99

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1. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December.
2. Pishke, J.S., 1992. "Individual Income, Incomplete Information and Aggregate Consumption," Papers 9238, Tilburg - Center for Economic Research.
   
   • Pischke, Jorn-Steffen, 1995. "Individual Income, Incomplete Information, and Aggregate Consumption," Econometrica, Econometric Society, vol. 63(4), pages 805-40, July.
   • Pischke, Jörn-Steffen, 1991. "Individual income, incomplete information, and aggregate consumption," ZEW Discussion Papers 91-07, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
   • Pischke, J., 1992. "Individual Income, Incomplete Information, and Aggregate Consumption," Discussion Paper 1992-38, Tilburg University, Center for Economic Research.
   • Pischke, J.S., 1993. "Individual Income, Incomplete Information, and Aggregate Consumption," Working papers 93-16, Massachusetts Institute of Technology (MIT), Department of Economics.
   • Jorn-Steffen Pischke, 1991. "Individual Income, Incomplete Information and Aggregate Consumption," Working Papers 669, Princeton University, Department of Economics, Industrial Relations Section..
3. Lillard, Lee A & Willis, Robert J, 1978. "Dynamic Aspects of Earning Mobility," Econometrica, Econometric Society, vol. 46(5), pages 985-1012, September.
   
   • Lee A. Lillard & Robert J. Willis, 1976. "Dynamic Aspects of Earnings Mobility," NBER Working Papers 0150, National Bureau of Economic Research, Inc.
4. Campbell, John Y & Deaton, Angus, 1989. "Why Is Consumption So Smooth?," Review of Economic Studies, Wiley Blackwell, vol. 56(3), pages 357-73, July.
   
   • Campbell, John & Deaton, Angus, 1989. "Why Is Consumption So Smooth?," Scholarly Articles 3221494, Harvard University Department of Economics.
5. Banerjee, Abhijit V & Newman, Andrew F, 1991. "Risk-Bearing and the Theory of Income Distribution," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 211-35, April.
   
   • Abhijit Banerjee & Andrew F. Newman, 1989. "Risk-Bearing and the Theory of Income Distribution," Discussion Papers 877, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
6. Farmer, Roger E A, 1988. "Money and Contracts," Review of Economic Studies, Wiley Blackwell, vol. 55(3), pages 431-46, July.
7. Allen, Franklin, 1985. "Repeated principal-agent relationships with lending and borrowing," Economics Letters, Elsevier, vol. 17(1-2), pages 27-31.
8. Andrew Atkeson & Robert E Lucas, 2010. "On Efficient Distribution with Private Information," Levine's Working Paper Archive 2179, David K. Levine.
   
   • Atkeson, Andrew & Lucas, Robert E, Jr, 1992. "On Efficient Distribution with Private Information," Review of Economic Studies, Wiley Blackwell, vol. 59(3), pages 427-53, July.
9. Thomas, Jonathan & Worrall, Tim, 1990. "Income fluctuation and asymmetric information: An example of a repeated principal-agent problem," Journal of Economic Theory, Elsevier, vol. 51(2), pages 367-390, August.
10. Fumio Hayashi, 1985. "Tests for Liquidity Constraints: A Critical Survey," NBER Working Papers 1720, National Bureau of Economic Research, Inc.
11. Townsend, Robert M, 1982. "Optimal Multiperiod Contracts and the Gain from Enduring Relationships under Private Information," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1166-86, December.
12. Robert E. Hall & Frederic S. Mishkin, 1982. "The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households," NBER Working Papers 0505, National Bureau of Economic Research, Inc.
    
    • Hall, Robert E & Mishkin, Frederic S, 1982. "The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households," Econometrica, Econometric Society, vol. 50(2), pages 461-81, March.
13. Townsend, Robert M., 1988. "Information constrained insurance : The revelation principle extended," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 411-450.
14. Gale, Douglas & Hellwig, Martin, 1985. "Incentive-Compatible Debt Contracts: The One-Period Problem," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 647-63, October.
15. Robert E. Hall, 1987. "Consumption," NBER Working Papers 2265, National Bureau of Economic Research, Inc.

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Citations

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Cited by:

1. Youngjae Lim & Robert Townsend, 1998. "General Equilibrium Models of Financial Systems: Theory and Measurement in Village Economies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 59-118, January.
   
   • Lim, Y. & Townsend, R.M., 1997. "General Equilibrium Models of Financial Systems: Theory and Measurement in Village Economies," Papers 9716, Centro de Estudios Monetarios Y Financieros-.
2. Marcelo Bianconi, 2003. "Private Information, Growth and Asset Prices with Stochastic Disturbances," Discussion Papers Series, Department of Economics, Tufts University 0301, Department of Economics, Tufts University.
   
   • Bianconi, Marcelo, 2003. "Private information, growth, and asset prices with stochastic disturbances," International Review of Economics & Finance, Elsevier, vol. 12(1), pages 1-24.
3. Tongwook Park, 2000. "Optimal Social Security with Moral Hazard," Econometric Society World Congress 2000 Contributed Papers 1265, Econometric Society.
4. Laurence Ales & Maziero Pricila, . "Accounting for Private Information," GSIA Working Papers 2010-E58, Carnegie Mellon University, Tepper School of Business.
   
   • Laurence Ales & Pricila Maziero, 2007. "Accounting for private information," 2007 Meeting Papers 804, Society for Economic Dynamics.
   • Pricila Maziero & Laurence Ales, 2008. "Accounting for private information," Working Papers 663, Federal Reserve Bank of Minneapolis.
5. David Backus & Silverio Foresi & Liuren Wu, 2002. "Contagion in Financial Markets," Finance 0207009, EconWPA.
6. Narayana R. Kocherlakota, 1996. "Money is memory," Staff Report 218, Federal Reserve Bank of Minneapolis.
   
   • Kocherlakota, Narayana R., 1998. "Money Is Memory," Journal of Economic Theory, Elsevier, vol. 81(2), pages 232-251, August.
7. Aiyagari, S. Rao & Williamson, Stephen, 1997. "Money, Credit, and Allocation Under Complete Dynamic Contracts and Incomplete Markets," Working Papers 97-20, University of Iowa, Department of Economics.
   
   • S. Rao Aiyagari & Stephen D. Williamson, 1998. "Money, Credit, and Allocation Under Complete Dynamic Contracts and Incomplete Markets," Game Theory and Information 9802003, EconWPA.
8. Dubois, Pierre, 2002. "Consommation, partage de risque et assurance informelle : développements théoriques et tests empiriques récents," L'Actualité Economique, Société Canadienne de Science Economique, vol. 78(1), pages 115-149, Mars.
9. Edward J. Green & Soo-Nam Oh, 1991. "Can a "credit crunch" be efficient?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 3-17.
10. Robert Townsend & Rolf Mueller, 1998. "Mechanism Design and Village Economies: From Credit, to Tenancy, to Cropping Groups," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 119-172, January.

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