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Cross-Country Heterogeneity in Intertemporal Substitution

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Abstract

We collect 2,735 estimates of the elasticity of intertemporal substitution in consumption from 169 published studies that cover 104 countries during different time periods. The estimates vary substantially from country to country, even after controlling for 30 aspects of study design. Our results suggest that income and asset market participation are the most effective factors in explaining the heterogeneity: households in rich countries and countries with high stock market participation substitute a larger fraction of consumption intertemporally in response to changes in expected asset returns. Micro-level studies that focus on sub-samples of rich households or asset holders also find systematically larger values of the elasticity.

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Paper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number 2013/11.

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Length: 35pages
Date of creation: Aug 2013
Date of revision: Aug 2013
Handle: RePEc:fau:wpaper:wp2013_11

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Keywords: Elasticity of intertemporal substitution; consumption; metaanalysis; Bayesian model averaging;

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Citations

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Cited by:
  1. Tomas Havranek, 2013. "Publication Bias in Measuring Intertemporal Substitution," Working Papers IES 2013/15, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2013.
  2. Jan Babecky & Tomas Havranek, 2014. "Structural reforms and growth in transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 22(1), pages 13-42, 01.
  3. Jan Babecky & Tomas Havranek, 2013. "Structural Reforms and Growth in Transition: A Meta-Analysis," William Davidson Institute Working Papers Series wp1057, William Davidson Institute at the University of Michigan.
  4. Bruno Martorano & Sudhanshu Handa & Carolyn Halpern & Harsha Thirumurthy & UNICEF Innocenti Research Centre, 2014. "Subjective Well-being, Risk Perceptions and Time Discounting: Evidence from a large-scale cash transfer programme," Innocenti Working Papers inwopa717, UNICEF Innocenti Research Centre.
  5. Irina Khvostova & Alexander Larin & Anna Novak, 2014. "Euler equation with habits and measurement errors: estimates on Russian micro data," HSE Working papers WP BRP 52/EC/2014, National Research University Higher School of Economics.
  6. Jan Babecky & Tomas Havranek, 2013. "Structural Reforms and Economic Growth: A Meta-Analysis," Working Papers 2013/08, Czech National Bank, Research Department.

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