Advanced Search
MyIDEAS: Login

Intertemporal consumption with directly measured welfare functions and subjective expectations

Contents:

Author Info

  • Kapteyn, Arie
  • Kleinjans, Kristin J.
  • van Soest, Arthur

Abstract

Euler equation estimation of intertemporal consumption models requires many, often unverifiable assumptions. These include assumptions on expectations and preferences. We aim at reducing some of these requirements by using direct subjective information on respondents' preferences and expectations. The results suggest that individually measured welfare functions and expectations have predictive power for the variation in consumption across households. Furthermore, estimates of the intertemporal elasticity of substitution based on the estimated welfare functions are plausible and of a similar order of magnitude as other estimates found in the literature. The model favored by the data only requires cross-section data for estimation.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6V8F-4W0R0GT-3/2/0d70f913483d74076d4ae26348ec70c0
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 72 (2009)
Issue (Month): 1 (October)
Pages: 425-437

as in new window
Handle: RePEc:eee:jeborg:v:72:y:2009:i:1:p:425-437

Contact details of provider:
Web page: http://www.elsevier.com/locate/jebo

Related research

Keywords: Expectations Consumption Euler equations;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Christopher D Carroll, 1997. "Death to the Log-Linearized Consumption euler Equation! (And Very Poor Health to the Second-Order Approximation)," Economics Working Paper Archive 390, The Johns Hopkins University,Department of Economics.
  2. Das, J.W.M. & Donkers, A.C.D., 1997. "How Certain are Dutch Households about Future Income? An Empirical Analysis," Discussion Paper 1997-38, Tilburg University, Center for Economic Research.
  3. Jeff Dominitz & Charles F. Manski, 1994. "Using Expectations Data to Study Subjective Income Expectations," NBER Working Papers 4937, National Bureau of Economic Research, Inc.
  4. Erich Battistin & Richard Blundell & Arthur Lewbel, 2007. "Why is consumption more log normal than income? Gibrat's law revisited," IFS Working Papers W07/08, Institute for Fiscal Studies.
  5. Stadt, H. van de & Geer, S.A. van de & Kapteyn, A.J., 1985. "The relativity of utility: Evidence from panel data," Open Access publications from Tilburg University urn:nbn:nl:ui:12-364325, Tilburg University.
  6. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Journal of Economic Literature, American Economic Association, vol. 34(4), pages 1797-1855, December.
  7. M. Fatih Guvenen, 2002. "Reconciling Conflicting Evidence on the Elasticity of Intertemporal Substitution: A Macroeconomic Perspective," RCER Working Papers 491, University of Rochester - Center for Economic Research (RCER), revised Mar 2003.
  8. Arie Kapteyn & Federica Teppa, 2003. "Hypothetical Intertemporal Consumption Choices," Economic Journal, Royal Economic Society, vol. 113(486), pages C140-C152, March.
  9. Davidson, Russell & MacKinnon, James G, 1981. "Several Tests for Model Specification in the Presence of Alternative Hypotheses," Econometrica, Econometric Society, vol. 49(3), pages 781-93, May.
  10. Kapteyn, A.J., 1977. "A theory of preference formation," Open Access publications from Tilburg University urn:nbn:nl:ui:12-364727, Tilburg University.
  11. Van Praag, Bernard, 1971. "The welfare function of income in Belgium: An empirical investigation," European Economic Review, Elsevier, vol. 2(3), pages 337-369.
  12. Orazio Attanasio & Hamish Low, 2002. "Estimating Euler equations," IFS Working Papers W02/06, Institute for Fiscal Studies.
  13. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
  14. 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.
  15. Robert E. Hall, 1981. "Intertemporal Substitution in Consumption," NBER Working Papers 0720, National Bureau of Economic Research, Inc.
  16. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
  17. Motohiro Yogo, 2004. "Estimating the Elasticity of Intertemporal Substitution When Instruments Are Weak," The Review of Economics and Statistics, MIT Press, vol. 86(3), pages 797-810, August.
  18. Van Praag, Bernard M. S. & Kapteyn, Arie, 1973. "Further evidence on the individual welfare function of income: An empirical investigatiion in The Netherlands," European Economic Review, Elsevier, vol. 4(1), pages 33-62, April.
  19. MatthewD. Rablen, 2008. "Relativity, Rank and the Utility of Income," Economic Journal, Royal Economic Society, vol. 118(528), pages 801-821, 04.
  20. Wansbeek, T.J. & Kapteyn, A.J., 1985. "The individual welfare function: A rejoinder," Open Access publications from Tilburg University urn:nbn:nl:ui:12-364331, Tilburg University.
  21. Wim Groot & Henriļæ½tte Maassen van den Brink & Erik Plug, 2004. "Money for health: the equivalent variation of cardiovascular diseases," Health Economics, John Wiley & Sons, Ltd., vol. 13(9), pages 859-872.
  22. Clark, Andrew E., 1999. "Are wages habit-forming? evidence from micro data," Journal of Economic Behavior & Organization, Elsevier, vol. 39(2), pages 179-200, June.
  23. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1995. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
  24. Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, 09.
  25. Wansbeek, T.J. & Kapteyn, A.J., 1985. "The individual welfare function: A review," Open Access publications from Tilburg University urn:nbn:nl:ui:12-364330, Tilburg University.
  26. Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Binswanger, Johannes & Salm, Martin, 2013. "Does Everyone Use Probabilities? Intuitive and Rational Decisions about Stockholding," IZA Discussion Papers 7265, Institute for the Study of Labor (IZA).
  2. Maurizio Bovi, 2014. "Shocks and the Expectations Formation Process. A Tale of Two Expectations," Natural Field Experiments 00390, The Field Experiments Website.
  3. van Rooij, Maarten & Teppa, Federica, 2014. "Personal traits and individual choices: Taking action in economic and non-economic decisions," Journal of Economic Behavior & Organization, Elsevier, vol. 100(C), pages 33-43.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:72:y:2009:i:1:p:425-437. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.