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Modeling Movements In Individual Consumption: A Time‐Series Analysis Of Grouped Data

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  • Orazio P. Attanasio
  • Margherita Borella

Abstract

We characterize the time‐series properties of group‐level consumption, income, and interest rates using microdata. We relate the coefficients of moving average representations to structural parameters of theoretical models of consumption behavior. Using long time series of cross sections to construct synthetic panel data for the United Kingdom, we find that for high‐educated individuals the Euler equation restrictions are not rejected, the elasticity of intertemporal substitution is higher than one, and there is evidence of “excess smoothness” of consumption. Low‐educated individuals, conversely, exhibit excess sensitivity of consumption to past income, and the elasticity of intertemporal substitution is not statistically different from zero.

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  • Orazio P. Attanasio & Margherita Borella, 2014. "Modeling Movements In Individual Consumption: A Time‐Series Analysis Of Grouped Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(4), pages 959-991, November.
    • Handle: RePEc:wly:iecrev:v:55:y:2014:i:4:p:959-991
    DOI: 10.1111/iere.12079
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