Intertemporal Choice and Inequality
AbstractThe permanent income hypothesis implies that, for any cohort of people, inequality in consumption and income should grow with age, a prediction that is here confirmed using data from eleven years of household survey data from the United States, twenty-two years from Great Britain, and fourteen years from Taiwan. In the permanent income hypothesis, the increase in inequality reflects the cumulative effect of luck on consumption. Other models of intertemporal choice--such as those with strong precautionary motives or liquidity constraints--can limit or even prevent the spread of inequality, as can insurance arrangements that share risk across individuals. Copyright 1994 by University of Chicago Press.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Political Economy.
Volume (Year): 102 (1994)
Issue (Month): 3 (June)
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Web page: http://www.journals.uchicago.edu/JPE/
Other versions of this item:
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
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