This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Consumption Growth, Income Growth And Earnings Uncertainity: Simple Cross-Country Evidence

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
JOON-HO HAHM
Abstract

The consumption growth/income growth parallel found in the low frequency cross-country aggregate data has been interpreted as evidence against the certainty equivalence life-cycle/permanent income hypothesis. This paper analyzes existence of precautionary premia in consumption growth as a potential source of the parallel, and tests the hypothesis that countries with inherently larger earnings uncertainty show systhematically steeper consumption growth paths and higher saving rates. Empirical results indicate a potentially important role of a precautionary saving motives in explaining cross-country differentials in consumption growth and saving rate. However, the presence of precautionary premia is not enough to account for the high correlation between average consumption growth and average income growth across countries. I conclude that the consumption growth/income growth parallel remains as a robust long-run empirical relationship challenging the life-cycle/permanent income hypothesis.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. 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://taylorandfrancis.metapress.com/link.asp?target=contribution&id=J1RL4231146L6168
File Format: text/html
File Function:
Download Restriction: Access to full text is restricted to subscribers.

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.

Publisher Info
Article provided by Korean International Economic Association in its journal International Economic Journal.

Volume (Year): 13 (1999)
Issue (Month): 2 (June)
Pages: 39-58
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:taf:intecj:v:13:y:1999:i:2:p:39-58

Contact details of provider:
Web page: http://taylorandfrancis.metapress.com/link.asp?id=110801

Order Information:
Web: http://www.tandf.co.uk/journals/subscription.html

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

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.:

  1. Barsky, Robert B & Mankiw, N Gregory & Zeldes, Stephen P, 1986. "Ricardian Consumers with Keynesian Propensities," American Economic Review, American Economic Association, vol. 76(4), pages 676-91, September. [Downloadable!] (restricted)
    Other versions:
  2. Campbell, John Y. & Mankiw, N. Gregory, 1991. "The response of consumption to income : A cross-country investigation," European Economic Review, Elsevier, vol. 35(4), pages 723-756, May. [Downloadable!] (restricted)
  3. Sibley, David S., 1975. "Permanent and transitory income effects in a model of optimal consumption with wage income uncertainty," Journal of Economic Theory, Elsevier, vol. 11(1), pages 68-82, August. [Downloadable!] (restricted)
  4. Chris Carroll & Lawrence H. Summers, 1989. "Consumption Growth Parallels Income Growth: Some New Evidence," NBER Working Papers 3090, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Karen E. Dynan, 1993. "How prudent are consumers?," Working Paper Series / Economic Activity Section 135, Board of Governors of the Federal Reserve System (U.S.).
  6. Christopher D. Carroll & Andrew A. Samwick, 1992. "The nature and magnitude of precautionary wealth," Working Paper Series / Economic Activity Section 124, Board of Governors of the Federal Reserve System (U.S.).
  7. Zeldes, Stephen P, 1989. "Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 275-98, May. [Downloadable!] (restricted)
    Other versions:
  8. Christopher D. Carroll, 1992. "The Buffer-Stock Theory of Saving: Some Macroeconomic Evidence," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1992-2), pages 61-156. [Downloadable!]
  9. Hahm, Joon-Ho, 1998. "Consumption adjustment to real interest rates: Intertemporal substitution revisited," Journal of Economic Dynamics and Control, Elsevier, vol. 22(2), pages 293-320, February. [Downloadable!] (restricted)
  10. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  11. Guiso, Luigi & Jappelli, Tullio & Terlizzese, Daniele, 1992. "Earnings Uncertainty and Precautionary Saving," CEPR Discussion Papers 699, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  12. Jonathan S. Skinner, 1987. "Risky Income, Life Cycle Consumption, and Precautionary Savings," NBER Working Papers 2336, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  13. R. Glenn Hubbard & Kenneth L. Judd, 1987. "Social Security and Individual Welfare: Precautionary Saving, LiquidityConstraints, and the Payroll Tax," NBER Working Papers 1736, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Dardanoni, Valentino, 1991. "Precautionary Savings under Income Uncertainty: A Cross-Sectional Analysis," Applied Economics, Taylor and Francis Journals, vol. 23(1), pages 153-60, Part B, J.
  15. Martin Feldstein, 1988. "The Effects of Fiscal Policies When Incomes are Uncertain: A Contradiction to Ricardian Equivalence," NBER Working Papers 2062, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  16. Flavin, Marjorie A, 1981. "The Adjustment of Consumption to Changing Expectations about Future Income," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 974-1009, October. [Downloadable!] (restricted)
  17. Caballero, Ricardo J, 1991. "Earnings Uncertainty and Aggregate Wealth Accumulation," American Economic Review, American Economic Association, vol. 81(4), pages 859-71, September. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? All bibliographic data on IDEAS has been put in the public domain by the publishers.

This page was last updated on 2009-12-10.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.