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Estimating and testing intertemporal preferences: A unified framework for consumption, work and savings

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Author Info
William Chin (IUPUI)

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Abstract

Five waves of the Panel Study of Income Dynamics (PSID), 1985-1989 including both wealth supplements, are used to construct an intertemporal budget constraint for selected single headed households. A new functional form of the dual consumer profit function rationalizing consumption, labor supply and savings is specified, estimated and used to test commonly maintained separability hypotheses. Both consumption- labor and time separability are rejected. Cross-price Frisch elasticities are found not to equal zero and this in turns affects all estimates of consumption, labor supply and saving elasticities. This paper contains new results from a previous paper submitted to EconWPA 12/16/03.

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File URL: http://129.3.20.41/eps/ge/papers/0409/0409002.pdf
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Publisher Info
Paper provided by EconWPA in its series GE, Growth, Math methods with number 0409002.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 64 pages
Date of creation: 12 Sep 2004
Date of revision:
Handle: RePEc:wpa:wuwpge:0409002

Note: Type of Document - pdf; pages: 64. PDF file, 64 Pages, 9 Tables, 3 Figures.
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Web page: http://129.3.20.41

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Related research
Keywords: intertemporal; consumption; labor; labour; wealth; savings; PSID; Panel Study of Income Dynamics; consumer profit function;

Find related papers by JEL classification:
D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

This paper has been announced in the following NEP Reports:

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. Altonji, Joseph G, 1986. "Intertemporal Substitution in Labor Supply: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S176-S215, June. [Downloadable!] (restricted)
    Other versions:
  2. Barnett, William A & Hahm, Jeong Ho, 1994. "Financial-Firm Production of Monetary Services: A Generalized Symmetric Barnett Variable-Profit-Function Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(1), pages 33-46, January.
  3. Barnett, William A, 1983. "New Indices of Money Supply and the Flexible Laurent Demand System," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(1), pages 7-23, January.
  4. Lewbel, Arthur, 1991. "The Rank of Demand Systems: Theory and Nonparametric Estimation," Econometrica, Econometric Society, vol. 59(3), pages 711-30, May. [Downloadable!] (restricted)
  5. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November. [Downloadable!] (restricted)
  6. Chaudhuri, Anita, 1995. "On the relationship between the Frisch and Slutsky decompositions," Economics Letters, Elsevier, vol. 47(3-4), pages 283-290, March. [Downloadable!] (restricted)
  7. Browning, Martin & Deaton, Angus & Irish, Margaret, 1985. "A Profitable Approach to Labor Supply and Commodity Demands over the Life-Cycle," Econometrica, Econometric Society, vol. 53(3), pages 503-43, May. [Downloadable!] (restricted)
  8. Philip Merrigan, 1994. "Family Labor Supply and the Life Cycle: Estimating the Browning, Deaton and Irish Household Model," Cahiers de recherche CREFE / CREFE Working Papers 26, CREFE, Université du Québec à Montréal.
  9. David L. Ryan & Terence J. Wales, 1999. "Flexible And Semiflexible Consumer Demands With Quadratic Engel Curves," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 277-287, May. [Downloadable!] (restricted)
    Other versions:
  10. Blackorby, Charles & Primont, Daniel & Russell, R. Robert, 1977. "On testing separability restrictions with flexible functional forms," Journal of Econometrics, Elsevier, vol. 5(2), pages 195-209, March. [Downloadable!] (restricted)
  11. Meghir, Costas & Weber, Guglielmo, 1996. "Intertemporal Nonseparability or Borrowing Restrictions? A Disaggregate Analysis Using a U.S. Consumption Panel," Econometrica, Econometric Society, vol. 64(5), pages 1151-81, September. [Downloadable!] (restricted)
  12. Kim, H Youn, 1993. "Frisch Demand Functions and Intertemporal Substitution in Consumption," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(3), pages 445-54, August. [Downloadable!] (restricted)
  13. Cooper, Russel J. & McLaren, Keith R. & Wong, Gary K. K., 2001. "On the empirical exploitation of consumers' profit functions in static analyses," Economics Letters, Elsevier, vol. 72(2), pages 181-187, August. [Downloadable!] (restricted)
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