On the Intertemporal Elasticity of Substitution under Nonhomothetic Utility
AbstractIn this note, we use a model with nonseparable and nonhomothetic preferences to estimate the intertemporal elasticity of substitution (IES). We show that, while the homothetic utility model may induce a bias that increases the elasticity of substitution between nondurables and durables, the estimated IES remains positive and significant. Copyright (c) 2008 The Ohio State University.
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Volume (Year): 40 (2008)
Issue (Month): 5 (08)
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