This paper presents estimates of the parameters of a consumption function for U.S. quarterly, seasonally-unadjusted data on nondurables, services, and durables. The theoretical novelty in the approach the author presents is in the derivation of the consumption function from an underlying many-goods allocation problem. Applying this model with an appropriate estimator to the data, he finds that (1) the (homogeneity) restrictions suggested by theory are not rejected; (2) there is no evidence of excess sensitivity to income; (3) there is no evidence to suggest that agents cannot adjust their durable stocks as they would wish; and (4) the intertemporal substitution elasticity is not well-determined.
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Volume (Year): 22 (1989) Issue (Month): 1 (February) Pages: 22-36 Download reference. The following formats are available: HTML
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Handle: RePEc:cje:issued:v:22:y:1989:i:1:p:22-36
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