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The Consumer Expenditure Function

In: Explorations in Economic Research, Volume 4, number 5

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  • Michael R. Darby

Abstract

A consumer expenditure function which integrates pure consumption and household investment in durable goods is formulated and estimated. Because of reduced reliance on the official classification of commodities as durable or nondurable, a considerable increase in ability to explain consumer expenditures results as compared to multiequation models. Further empirical investigation provides strong evidence that: (1) private sector income is significantly better than disposable personal income for explaining consumer expenditures, (2) the M1 definition of money is similarly superior to both M2 and M3 definitions, and (3) the weight of current income in permanent income is about 10% per annum. Data appendix included.

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This chapter was published in:

  • Nber, 1977. "Explorations in Economic Research, Volume 4, number 5," NBER Books, National Bureau of Economic Research, Inc, number lint77-1, July.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 9106.

    Handle: RePEc:nbr:nberch:9106

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    1. Raymond W. Goldsmith, 1962. "The National Wealth of the United States in the Postwar Period," NBER Books, National Bureau of Economic Research, Inc, number gold62-1, July.
    2. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    3. Kochin, Levis A, 1974. "Are Future Taxes Anticipated by Consumers? Comment," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 6(3), pages 385-94, August.
    4. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
    5. Darby, Michael R, 1972. "The Allocation of Transitory Income Among Consumers' Assets," American Economic Review, American Economic Association, American Economic Association, vol. 62(5), pages 928-41, December.
    6. Milton Friedman & Anna Jacobson Schwartz, 1970. "Monetary Statistics of the United States: Estimates, Sources, Methods," NBER Books, National Bureau of Economic Research, Inc, number frie70-1, July.
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    Cited by:
    1. James P. Smith & Michael P. Ward, 2004. "Asset Accumulation and Family Size," Labor and Demography, EconWPA 0403001, EconWPA.

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