The Permanent Income Hypothesis (PIH) predicts an income innovation that has the same size effect on consumption as on permanent income, an implication we examine with a cross-country test proposed by Kormendi and LaHaye (1984). The data from industrial countries support PIH but data from developing countries do not. Also, however, data from countries with high quality national income accounts support PIH whereas data from countries with low quality accounts do not. The stage of economic development and data quality are highly correlated. The evidence suggests that the results may be driven primarily by data quality differences rather than systematically different behavior between industrial and developing countries. Copyright 1997 by Taylor and Francis Group
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Volume (Year): 11 (1997) Issue (Month): 3 (September) Pages: 451-68 Download reference. The following formats are available: HTML
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