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 and Aggregate Constraints: Evidence from U.S. States and Canadian Provinces

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Charlotte Ostergaard
Bent E. Serensen
Oved Yosha

Additional information is available for the following registered author(s):

Abstract

State-level consumption exhibits excess sensitivity to lagged income to the same extent as U.S. aggregate data, but state-specific (idiosyncratic) consumption exhibits substantially less sensitivity to lagged state-specific incomea result that also holds for Canadian provinces. We propose the following interpretation: borrowing and lending in response to changes in consumer demand are easier for individual U.S. states than for the United States as a whole, and therefore, the measured deviation from the benchmark permanent income hypothesis model is smaller. However, lagged state-specific variables help predict state-specific consumption, suggesting that the PIH model still requires qualification.

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://www.journals.uchicago.edu/cgi-bin/resolve?JPE110306PDF
File Format: application/pdf
File Function: main text
Download Restriction: A link to the University of Chicago Press online edition may require you to be a subscriber to this journal to access the full text, unless the article is not yet subject to access control.

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 University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 110 (2002)
Issue (Month): 3 (June)
Pages: 634-645
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ucp:jpolec:v:110:y:2002:i:3:p:634-645

Contact details of provider:
Postal: The University of Chicago Press, Journals Division, P.O. Box 37005 Chicago, IL 60637
Fax: (773) 753-0811
Email:
Web page: http://www.journals.uchicago.edu/JPE/home.html

Order Information:
Web: http://www.journals.uchicago.edu/JPE/order1.html

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

Related research
Keywords:

Other versions of this item:

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. Gali, Jordi, 1991. "Budget Constraints and Time-Series Evidence on Consumption," American Economic Review, American Economic Association, vol. 81(5), pages 1238-53, December. [Downloadable!] (restricted)
  2. Shapiro, Matthew D., 1984. "The permanent income hypothesis and the real interest rate : Some evidence from panel data," Economics Letters, Elsevier, vol. 14(1), pages 93-100. [Downloadable!] (restricted)
  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)
    Other versions:
  4. Altonji, Joseph G & Siow, Aloysius, 1987. "Testing the Response of Consumption to Income Changes with (Noisy) Panel Data," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 293-328, May. [Downloadable!] (restricted)
    Other versions:
  5. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-87, December. [Downloadable!] (restricted)
  6. Heaton, John & Lucas, Deborah J, 1996. "Evaluating the Effects of Incomplete Markets on Risk Sharing and Asset Pricing," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 443-87, June. [Downloadable!] (restricted)
    Other versions:
  7. Kocherlakota, Narayana R, 1996. "Implications of Efficient Risk Sharing without Commitment," Review of Economic Studies, Blackwell Publishing, vol. 63(4), pages 595-609, October. [Downloadable!] (restricted)
  8. John Y. Campbell & N. Gregory Mankiw, 1989. "Consumption, Income and Interest Rates: Reinterpreting the Time Series Evidence," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 185-246 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  9. Pischke, Jorn-Steffen, 1995. "Individual Income, Incomplete Information, and Aggregate Consumption," Econometrica, Econometric Society, vol. 63(4), pages 805-40, July. [Downloadable!] (restricted)
    Other versions:
  10. Forni, Mario & Reichlin, Lucrezia, 1997. "National Policies and Local Economies: Europe and the United States," CEPR Discussion Papers 1632, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  11. Campbell, John Y & Mankiw, N Gregory, 1987. "Are Output Fluctuations Transitory?," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 857-80, November. [Downloadable!] (restricted)
    Other versions:
  12. Clarida, Richard H, 1991. "Aggregate Stochastic Implications of the Life Cycle Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 851-67, August. [Downloadable!] (restricted)
  13. West, Kenneth D., 1988. "The insensitivity of consumption to news about income," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 17-33, January. [Downloadable!] (restricted)
    Other versions:
  14. Maurice Obstfeld, 1994. "Are Industrial-Country Consumption Risks Globally Diversified?," NBER Working Papers 4308, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  15. Beaudry, Paul & van Wincoop, Eric, 1996. "The Intertemporal Elasticity of Substitution: An Exploration Using a US Panel of State Data," Economica, London School of Economics and Political Science, vol. 63(251), pages 495-512, August. [Downloadable!] (restricted)
  16. 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.
    Other versions:
  17. Lawrence J. Christiano, 1987. "Why is consumption less volatile than income?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 2-20. [Downloadable!]
  18. Campbell, John Y & Deaton, Angus, 1989. "Why Is Consumption So Smooth?," Review of Economic Studies, Blackwell Publishing, vol. 56(3), pages 357-73, July. [Downloadable!] (restricted)
  19. Clarida, R.H., 1991. "Aggregate Stochastic Implications of the Life Cycle Hypothesis," Discussion Papers 1991_14, Columbia University, Department of Economics.
  20. 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)
    Other versions:
  21. Heaton, John, 1993. "The Interaction between Time-Nonseparable Preferences and Time Aggregation," Econometrica, Econometric Society, vol. 61(2), pages 353-85, March. [Downloadable!] (restricted)
  22. Cochrane, John H, 1994. "Permanent and Transitory Components of GNP and Stock Prices," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 241-65, February. [Downloadable!] (restricted)
  23. Orazio P. Attanasio & Guglielmo Weber, 1994. "Is Consumption Growth Consistent with Intertemporal Optimization? Evidence from the Consumer Expenditure Survey," NBER Working Papers 4795, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  24. Hansen, Lars Peter & Singleton, Kenneth J, 1983. "Stochastic Consumption, Risk Aversion, and the Temporal Behavior of Asset Returns," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 249-65, April. [Downloadable!] (restricted)
  25. 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)
    Other versions:
  26. Attfield, C. L. F. & Demery, D. & Duck, N. W., 1992. "Partial adjustment and the permanent income hypothesis," European Economic Review, Elsevier, vol. 36(6), pages 1205-1222, August. [Downloadable!] (restricted)
  27. Mankiw, N. Gregory, 1981. "The permanent income hypothesis and the real interest rate," Economics Letters, Elsevier, vol. 7(4), pages 307-311. [Downloadable!] (restricted)
  28. repec:fth:harver:1435 is not listed on IDEAS
  29. Sorensen, Bent E. & Yosha, Oved, 1998. "International risk sharing and European monetary unification," Journal of International Economics, Elsevier, vol. 45(2), pages 211-238, August. [Downloadable!] (restricted)
    Other versions:
  30. Deaton, A. & Grosh, M., 1998. "Consumption," Papers 191, Princeton, Woodrow Wilson School - Development Studies.
  31. Cochrane, John H, 1988. "How Big Is the Random Walk in GNP?," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 893-920, October. [Downloadable!] (restricted)
  32. 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)
  33. 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)
  34. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-91, May. [Downloadable!] (restricted)
    Other versions:
  35. 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)
  36. 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)
  37. Christiano, Lawrence J & Eichenbaum, Martin & Marshall, David, 1991. "The Permanent Income Hypothesis Revisited," Econometrica, Econometric Society, vol. 59(2), pages 397-423, March. [Downloadable!] (restricted)
    Other versions:
  38. Michener, Ron, 1984. "Permanent income in general equilibrium," Journal of Monetary Economics, Elsevier, vol. 13(3), pages 297-305, May. [Downloadable!] (restricted)
  39. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
    Other versions:
Full references

Cited by:
(explanations, 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. Kalemli-Ozcan, Sebnem & Reshef, Ariell & Sorensen, Bent E & Yosha, Oved, 2006. "Why Does Capital Flow to Rich States?," CEPR Discussion Papers 5635, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Balli, Faruk & Sorensen, Bent E., 2007. "Risk Sharing among OECD and EU Countries: The Role of Capital Gains, Capital Income, Transfers, and Saving," MPRA Paper 10223, University Library of Munich, Germany. [Downloadable!]
  3. Pierfederico Asdrubali & Soyoung Kim, 2005. "Incomplete Intertemporal Consumption Smoothing and Incomplete Risksharing," International Finance 0506010, EconWPA. [Downloadable!]
    Other versions:
  4. Bent E. Sorensen & Maria J. Luengo-Prado, 2004. "The Buffer Stock Model and the Aggregate Propensity to Consume," Econometric Society 2004 North American Summer Meetings 457, Econometric Society. [Downloadable!]
  5. Joseph DeJuan & Maria J. Luengo-Prado, 2005. "Consumption and Aggregate Constraints: International Evidence," Macroeconomics 0501018, EconWPA. [Downloadable!]
    Other versions:
  6. Kris Jacobs & Stephane Pallage & Michel A. Robe, 2004. "Market Incompleteness and the Equity Premium Puzzle: Evidence from State-Level Data," CIRANO Working Papers 2004s-54, CIRANO. [Downloadable!]
    Other versions:
  7. Stephane Pallage & Michel A. Robe, 2002. "The States vs. the states: On the Welfare Cost of Business Cycles in the U.S," Cahiers de recherche du Département des sciences économiques, UQAM 20-17, Université du Québec à Montréal, Département des sciences économiques, revised Oct 2002. [Downloadable!]
    Other versions:
  8. Domenico Giannone & Michele Lenza, 2008. "The Feldstein-Horioka fact," Working Paper Series 873, European Central Bank. [Downloadable!]
    Other versions:
  9. Hanno Lustig & Stijn Van Nieuwerburgh, 2002. "Housing Collateral, Consumption Insurance and Risk Premia," Macroeconomics 0211008, EconWPA. [Downloadable!]
  10. Faruk Balli & Bent E. Sørensen, 2006. "The Impact of the EMU on Channels of Risk Sharing between Member Countries," Papers of the Annual IUE-SUNY Cortland Conference in Economics, in: Proceedings of the Conference on Human and Economic Resources, pages 399-429 Izmir University of Economics. [Downloadable!]
  11. Oguz Esen & Ayla Ogus (ed.), 2006. "Proceedings of the International Conference on Human and Economic Resources," Proceedings of the IUE-SUNY Cortland Conference in Economics, Izmir University of Economics, number 2006, November. [Downloadable!]
Statistics
Access and download statistics

Did you know? You can include your works in the database easily by uploading them on the Munich Personal RePEc Archive (MPRA) if you do not have access to an institutional RePEc archive.

This page was last updated on 2009-11-16.

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.