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The Propensity to Consume Income from Different Sources and Implications for Saving: An Application to Norwegian Farm Households

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  • Sand, Roald
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    Abstract

    Traditionally, farm households have relatively high saving and low marginal propensity to consume (MPC). In the last decades, this seems to have changed. To investigate these matters, a dynamic consumption model is estimated using a GMM-system estimator and a panel of 258 Norwegian farm households followed from 1976-1997. The main findings are that the MPC of farm income is lower than for off-farm income and that average MPC is low but increasing over time in these households. This may imply that some of the observed reduction in farm saving is explained by reduced need for precautionary saving.

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    File URL: http://purl.umn.edu/15716
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    Bibliographic Info

    Paper provided by International Agricultural Policy Reform and Adjustment Project (IAPRAP) in its series Workshop on the Farm Household-Firm Unit: Its Importance in Agriculture and Implications for Statistics, April 12-13, 2002, Wye Campus,Imperial College with number 15716.

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    Date of creation: 2002
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    Handle: RePEc:ags:iapr02:15716

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    Web page: http://agadjust.aers.psu.edu/

    Related research

    Keywords: saving; consumption; dynamic panel model; Consumer/Household Economics;

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    1. Knut A. Magnussen, 1994. "Precautionary Saving and Old-Age Pensions," Discussion Papers 108, Research Department of Statistics Norway.
    2. O'Mara, L. Paul & Mullen, John D. & Powell, Roy A. & Reece, B.F., 1988. "The Consumption Behaviour of Farmers: a review of the evidence," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 56(02), August.
    3. Miles, David, 1997. "A Household Level Study of the Determinants of Incomes and Consumption," Economic Journal, Royal Economic Society, vol. 107(440), pages 1-25, January.
    4. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Discussion Papers 96-01, University of Copenhagen. Department of Economics.
    5. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
    6. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
    7. Chen, Kevin Z. & D. Meilke, Karl & Turvey, Calum, 1999. "Income risk and farm consumption behavior," Agricultural Economics, Blackwell, vol. 20(2), pages 173-183, March.
    8. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
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