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Does consumption respond to predicted increases in cash-hand availability?: Evidence from the Italian "severance pay"

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  • Borella, Margherita
  • Fornero, Elsa
  • Rossi, Mariacristina

Abstract

We examine whether Italian household consumption exhibits excess sensitivity to "severance pay", a sizable lump-sum that workers receive at job termination. We find no evidence of excess sensitivity of non-durable expenditure to this anticipated cash-in-hand change.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 105 (2009)
Issue (Month): 1 (October)
Pages: 127-129

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Handle: RePEc:eee:ecolet:v:105:y:2009:i:1:p:127-129

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Life-cycle Euler equation Excess sensitivity Severance pay;

References

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  1. Nicholas S. Souleles, 1999. "The Response of Household Consumption to Income Tax Refunds," American Economic Review, American Economic Association, vol. 89(4), pages 947-958, September.
  2. Deaton, Angus, 1992. "Understanding Consumption," OUP Catalogue, Oxford University Press, number 9780198288244, September.
  3. Melvin Stephens, 2008. "The Consumption Response to Predictable Changes in Discretionary Income: Evidence from the Repayment of Vehicle Loans," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 241-252, May.
  4. Raffaele Miniaci & Chiara Monfardini & Guglielmo Weber, 2003. "Is there a retirement consumption puzzle in Italy?," IFS Working Papers W03/14, Institute for Fiscal Studies.
  5. Matthew D. Shapiro & Joel Slemrod, 1993. "Consumer Response to the Timing of Income: Evidence from a Change in Tax Withholding," NBER Working Papers 4344, National Bureau of Economic Research, Inc.
  6. Chang-Tai Hsieh, 2003. "Do Consumers React to Anticipated Income Changes? Evidence from the Alaska Permanent Fund," American Economic Review, American Economic Association, vol. 93(1), pages 397-405, March.
  7. Michael Hurd & Susann Rohwedder, 2005. "The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement," Working Papers 242, RAND Corporation Publications Department.
  8. M. Dolores Collado & Martín Browning, 1999. "-The Response Of Expenditures To Anticipated Income Changes: Panel Data Estimates," Working Papers. Serie AD 1999-19, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  9. Brahima Coulibaly & Geng Li, 2006. "Do Homeowners Increase Consumption after the Last Mortgage Payment? An Alternative Test of the Permanent Income Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 10-19, February.
  10. James Banks & Richard Blundell & Sarah Tanner, 1995. "Is there a retirement-savings puzzle?," IFS Working Papers W95/04, Institute for Fiscal Studies.
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Cited by:
  1. Carolina Fugazza, 2011. "Tracking the Italian employees'TFR over their working life careers," CeRP Working Papers 125, Center for Research on Pensions and Welfare Policies, Turin (Italy).

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