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! ]

Did Household Consumption Become More Volatile?

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Olga gorbachev

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

Abstract

We show that volatility of household consumption, after accounting for predictable variation arising from movements in real interest rates, preferences and income shocks, increased between 1970 and 2002. For single parent households, and households headed by nonwhite or poorly educated individuals, this rise was signi¯cantly larger. This stands in sharp contrast with the dramatic fall in aggregate volatility of the US economy, and may have significant welfare implications. A spectacular fall in average covariances of consumption growth rates across households over this period accounts for the diverging paths of aggregate and household level volatilities.

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.columbia.edu/~ocg2001/JMP.pdf
Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify (Santiago Sanchez-Pages)
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 161.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 36
Date of creation: 31 Jul 2007
Date of revision:
Handle: RePEc:edn:esedps:161

Contact details of provider:
Postal: 50 George Square, EH8 9JY, Edinburgh
Phone: +44(0)1316508361
Fax: +44(0)1316504514
Web page: http://www.econ.ed.ac.uk/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Santiago Sanchez-Pages).

Related research
Keywords: consumption risk; volatility decomposition; aggregate volatility; panel data.;

Find related papers by JEL classification:
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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. Joseph Gyourko & Joseph Tracy, 2003. "Using home maintenance and repairs to smooth variable earnings," Staff Reports 168, Federal Reserve Bank of New York. [Downloadable!]
    Other versions:
  2. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Discussion Papers 96-01, University of Copenhagen. Department of Economics.
    Other versions:
  3. Peter Gottschalk & Robert Moffitt, 1994. "The Growth of Earnings Instability in the U.S. Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1994-2), pages 217-272. [Downloadable!]
  4. Donald Cox & Serena Ng & Andreas Waldkirch, 2000. "Intergenerational Linkages in Consumption Behavior," Econometric Society World Congress 2000 Contributed Papers 1791, Econometric Society, revised 08 Nov 2000. [Downloadable!]
    Other versions:
  5. Erik Hurst & Arthur Kennickell & Annamaria Lusardi & Francisco Torralba, 2006. "Precautionary Savings and the Importance of Business Owners," CFS Working Paper Series 2006/16, Center for Financial Studies. [Downloadable!]
    Other versions:
  6. James H. Stock & Mark W. Watson, 2002. "Has the Business Cycle Changed and Why?," NBER Working Papers 9127, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. MaCurdy, Thomas E., 1982. "The use of time series processes to model the error structure of earnings in a longitudinal data analysis," Journal of Econometrics, Elsevier, vol. 18(1), pages 83-114, January. [Downloadable!] (restricted)
  8. Christopher D. Carroll, 2000. "Requiem for the Representative Consumer? Aggregate Implications of Microeconomic Consumption Behavior," American Economic Review, American Economic Association, vol. 90(2), pages 110-115, May. [Downloadable!] (restricted)
    Other versions:
  9. Tullio Jappelli & Jörn-Steffen Pischke & Nicholas S. Souleles, 1998. "Testing For Liquidity Constraints In Euler Equations With Complementary Data Sources," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 251-262, May. [Downloadable!] (restricted)
    Other versions:
  10. Christopher D. Carroll & Karen E. Dynan & Spencer D. Krane, 2003. "Unemployment Risk and Precautionary Wealth: Evidence from Households' Balance Sheets," The Review of Economics and Statistics, MIT Press, vol. 85(3), pages 586-604, 05. [Downloadable!] (restricted)
    Other versions:
  11. Orazio P. Attanasio & Hamish Low, 2004. "Estimating Euler Equations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(2), pages 405-435, April. [Downloadable!] (restricted)
    Other versions:
  12. Storesletten, Kjetil & Telmer, Christopher I. & Yaron, Amir, 2004. "Consumption and risk sharing over the life cycle," Journal of Monetary Economics, Elsevier, vol. 51(3), pages 609-633, April. [Downloadable!] (restricted)
    Other versions:
  13. Costas Meghir, 2004. "A Retrospective on Friedman's Theory of Permanent Income," Economic Journal, Royal Economic Society, vol. 114(496), pages F293-F306, 06. [Downloadable!] (restricted)
    Other versions:
  14. Gadi Barlevy, 2005. "The cost of business cycles and the benefits of stabilization," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 32-49. [Downloadable!]
  15. Graciela Chichilnisky & Olga Gorbachev, 2004. "Volatility in the knowledge economy," Discussion Papers 0304-13, Columbia University, Department of Economics. [Downloadable!]
    Other versions:
  16. Jonathan A. Parker & Bruce Preston, 2005. "Precautionary Saving and Consumption Fluctuations," American Economic Review, American Economic Association, vol. 95(4), pages 1119-1143, September. [Downloadable!]
    Other versions:
  17. Sule Alan & Orazio Attanasio & Martin Browning, 2005. "Estimating Euler Equations with Noisy Data: Two Exact GMM Estimators," CAM Working Papers 2005-10, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics. [Downloadable!]
    Other versions:
  18. Tom Krebs, 2003. "Growth and Welfare Effects of Business Cycles in Economies with Idiosyncratic Human Capital Risk," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 6(4), pages 846-868, October. [Downloadable!] (restricted)
  19. 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:
  20. Campbell, John Y, 1987. "Does Saving Anticipate Declining Labor Income? An Alternative Test of the Permanent Income Hypothesis," Econometrica, Econometric Society, vol. 55(6), pages 1249-73, November. [Downloadable!] (restricted)
    Other versions:
  21. Ziliak, James P., 1998. "Does the choice of consumption measure matter? An application to the permanent-income hypothesis," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 201-216, February. [Downloadable!] (restricted)
  22. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier. [Downloadable!] (restricted)
  23. 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:
  24. Christopher D. Carroll & Andrew A. Samwick, 1998. "How Important Is Precautionary Saving?," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 410-419, August. [Downloadable!] (restricted)
    Other versions:
  25. Dirk Krueger & Fabrizio Perri, 2006. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory," Review of Economic Studies, Blackwell Publishing, vol. 73(1), pages 163-193, 01. [Downloadable!] (restricted)
    Other versions:
  26. Olivier Blanchard & John Simon, 2001. "The Long and Large Decline in U.S. Output Volatility," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2001-1), pages 135-174. [Downloadable!]
  27. repec:fth:pennfi:69 is not listed on IDEAS
  28. James X. Sullivan, 2005. "Borrowing during unemployment: unsecured debt as a safety net," Proceedings, Federal Reserve Bank of Chicago, issue Apr. [Downloadable!]
    Other versions:
  29. Beaudry, Paul & Pages, Carmen, 2001. "The cost of business cycles and the stabilization value of unemployment insurance," European Economic Review, Elsevier, vol. 45(8), pages 1545-1572, August. [Downloadable!] (restricted)
    Other versions:
  30. Skinner, Jonathan, 1987. "A superior measure of consumption from the panel study of income dynamics," Economics Letters, Elsevier, vol. 23(2), pages 213-216. [Downloadable!] (restricted)
  31. Banks, James & Blundell, Richard & Brugiavini, Agar, 2001. "Risk Pooling, Precautionary Saving and Consumption Growth," Review of Economic Studies, Blackwell Publishing, vol. 68(4), pages 757-79, October.
    Other versions:
  32. Carroll, Christopher D. & Samwick, Andrew A., 1997. "The nature of precautionary wealth," Journal of Monetary Economics, Elsevier, vol. 40(1), pages 41-71, September. [Downloadable!] (restricted)
    Other versions:
  33. Gadi Barlevy, 2004. "The Cost of Business Cycles Under Endogenous Growth," American Economic Review, American Economic Association, vol. 94(4), pages 964-990, September. [Downloadable!]
    Other versions:
  34. Giorgio E. Primiceri & Thijs van Rens, 2007. "Heterogeneous Life-Cycle Profiles, Income Risk and Consumption Inequality," IZA Discussion Papers 3239, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  35. Richard Blundell & Luigi Pistaferri & Ian Preston, 2004. "Consumption inequality and partial insurance," IFS Working Papers W04/28, Institute for Fiscal Studies. [Downloadable!]
    Other versions:
  36. Orazio Attanasio & Erich Battistin & Hidehiko Ichimura, 2004. "What Really Happened to Consumption Inequality in the US?," NBER Working Papers 10338, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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. Claudia M. Buch & Christian Pierdzioch, 2009. "Low Skill but High Volatility?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Claudia M. Buch & Jörg Döpke & Kerstin Stahn, 2008. "Great Moderation at the Firm Level? Unconditional vs. Conditional Output Volatility," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  3. Steven J. Davis & James A. Kahn, 2008. "Interpreting the Great Moderation: Changes in the Volatility of Economic Activity at the Macro and Micro Levels," NBER Working Papers 14048, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Claudia M. Buch, 2008. "The Great Risk Shift? Income Volatility in an International Perspective," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  5. Buch, Claudia M. & Döpke, Jörg & Stahn, Kerstin, 2008. "Great moderation at the firm level? Unconditional versus conditional output volatility," Discussion Paper Series 1: Economic Studies 2008,13, Deutsche Bundesbank, Research Centre. [Downloadable!]
  6. Giorgio E. Primiceri & Thijs van Rens, 2007. "Heterogeneous Life-Cycle Profiles, Income Risk and Consumption Inequality," IZA Discussion Papers 3239, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
Statistics
Access and download statistics

Did you know? IDEAS also indexes book chapters.

This page was last updated on 2009-11-4.

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.