The Life Cycle Permanent-Income Model and Consumer Durables
This paper presents an extension of the life cycle permanent-income model of consumption to the case of a durable good whose purchase involves limpy transactions costs. By integrating the advancement/postponement decision in the individual's analysis, the implications of the model are different in some respects from those of standard consumption theory. Using explicit aggregation it is shown that expenditures on durables display very large short-run elasticity to changes in permanent income. Empirical tests generally produce results that are in line with the theory.
Volume (Year): (1988)
Issue (Month): 9 ()
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