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Is Consumption Growth Consistent with Intertemporal Optimization? Evidence from the Consumer Expenditure Survey

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Author Info
Attanasio, Orazio P
Weber, Guglielmo

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Abstract

In this paper, the authors show that some of the predictions of models of consumer intertemporal optimization are in line with the patterns of nondurable expenditure observed in U.S. household-level data. They propose a flexible specification of preferences that allows multiple commodities and yields empirically tractable equations. The authors estimate preference parameters using the only U.S. micro data set with complete consumption information. They show that previous rejections can be explained by the simplifying assumptions made in previous studies. The authors also show that results obtained using good consumption or aggregate data can be misleading. Copyright 1995 by University of Chicago Press.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 103 (1995)
Issue (Month): 6 (December)
Pages: 1121-57
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Handle: RePEc:ucp:jpolec:v:103:y:1995:i:6:p:1121-57

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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. Attanasio, Orazio P & Weber, Guglielmo, 1993. "Consumption Growth, the Interest Rate and Aggregation," Review of Economic Studies, Blackwell Publishing, vol. 60(3), pages 631-49, July. [Downloadable!] (restricted)
  2. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May. [Downloadable!] (restricted)
    Other versions:
  3. Hall, Robert E, 1988. "Intertemporal Substitution in Consumption," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 339-57, April. [Downloadable!] (restricted)
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  4. B. Douglas Bernheim & John B. Shoven, 1991. "National Saving and Economic Performance," NBER Books, National Bureau of Economic Research, Inc, number bern91-2.
  5. 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)
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  6. Keane, Michael P & Runkle, David E, 1992. "On the Estimation of Panel-Data Models with Serial Correlation When Instruments Are Not Strictly Exogenous," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(1), pages 1-9, January.
  7. Browning, Martin & Deaton, Angus & Irish, Margaret, 1985. "A Profitable Approach to Labor Supply and Commodity Demands over the Life-Cycle," Econometrica, Econometric Society, vol. 53(3), pages 503-43, May. [Downloadable!] (restricted)
  8. Orazio Attanasio & Steven J. Davis, 1994. "Relative Wage Movements and the Distribution of Consumption," NBER Working Papers 4771, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Campbell, John Y & Mankiw, N Gregory, 1990. "Permanent Income, Current Income, and Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(3), pages 265-79, July.
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  10. Blundell, Richard & Pashardes, Panos & Weber, Guglielmo, 1993. "What Do We Learn About Consumer Demand Patterns from Micro Data?," American Economic Review, American Economic Association, vol. 83(3), pages 570-97, June. [Downloadable!] (restricted)
  11. Fumio Hayashi, 1985. "Tests for Liquidity Constraints: A Critical Survey," NBER Working Papers 1720, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Moffitt, Robert, 1993. "Identification and estimation of dynamic models with a time series of repeated cross-sections," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 99-123, September. [Downloadable!] (restricted)
  13. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-46, April. [Downloadable!] (restricted)
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  14. Attanasio, O.P. & Browning, M., 1993. "Consumption Over the Life Cycle and Over the Business Cycle," Papers 9314, Tilburg - Center for Economic Research.
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  15. Hall, Robert E & Mishkin, Frederic S, 1982. "The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households," Econometrica, Econometric Society, vol. 50(2), pages 461-81, March. [Downloadable!] (restricted)
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  16. Jeffrey A. Miron, 1987. "Seasonal Fluctuations and the Life Cycle-Permanent Income Model of Consumption," NBER Working Papers 1845, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  17. Hayashi, Fumio & Sims, Christopher A, 1983. "Nearly Efficient Estimation of Time Series Models with Predetermined, but Not Exogenous, Instruments," Econometrica, Econometric Society, vol. 51(3), pages 783-98, May. [Downloadable!] (restricted)
  18. repec:fth:harver:1466 is not listed on IDEAS
  19. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June. [Downloadable!] (restricted)
  20. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier. [Downloadable!] (restricted)
  21. Deaton, A. & Grosh, M., 1998. "Consumption," Papers 191, Princeton, Woodrow Wilson School - Development Studies.
  22. Orazio P. Attanasio, 1993. "A Cohort Analysis of Saving Behavior by U.S. Households," NBER Working Papers 4454, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  23. Cochrane, John H, 1991. "A Simple Test of Consumption Insurance," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 957-76, October. [Downloadable!] (restricted)
  24. Orazio P. Attanasio & Martin Browning, 1994. "Testing the life cycle model consumption: what can we learn from micro and macro data?," Investigaciones Economicas, Fundación SEPI, vol. 18(3), pages 433-463, September. [Downloadable!]
  25. Mace, Barbara J, 1991. "Full Insurance in the Presence of Aggregate Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 928-56, October. [Downloadable!] (restricted)
  26. Hansen, Lars Peter & Singleton, Kenneth J, 1982. "Generalized Instrumental Variables Estimation of Nonlinear Rational Expectations Models," Econometrica, Econometric Society, vol. 50(5), pages 1269-86, September. [Downloadable!] (restricted)
  27. 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)
  28. Blundell, R. & Browning, M. & Meghir, C., 1989. "A Microeconometric Model Of Intertemporal Substitution And Consumer Demand," The Warwick Economics Research Paper Series (TWERPS) 324, University of Warwick, Department of Economics.
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