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Earnings-Related Borrowing Restrictions: Empirical Evidence from a Pseudo Panel for the U.K

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  • Guglielmo Weber

Abstract

The life-cycle model with liquidity constraints produces an Euler equation with unobservable Kuhn-Tucker multipliers. If borrowing restrictions depend on earnings and leisure is a choice variable one can derive an Euler equation involving only observable variables. This paper presents estimates of the Euler equation on a pseudo (or "synthetic") panel of UK households. Most parameters are well determined and in agreement with the model's predictions. They can therefore be used to evaluate each cohort's Kuhn-Tucker multiplier over the sample period.

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  • Guglielmo Weber, 1993. "Earnings-Related Borrowing Restrictions: Empirical Evidence from a Pseudo Panel for the U.K," Annals of Economics and Statistics, GENES, issue 29, pages 157-173.
    • Handle: RePEc:adr:anecst:y:1993:i:29:p:157-173
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    Cited by:

    1. Orazio P. Attanasio, 1998. "Consumption Demand," NBER Working Papers 6466, National Bureau of Economic Research, Inc.
    2. Orazio P. Attanasio & Guglielmo Weber, 2010. "Consumption and Saving: Models of Intertemporal Allocation and Their Implications for Public Policy," Journal of Economic Literature, American Economic Association, vol. 48(3), pages 693-751, September.
    3. Renata Bottazzi, 2004. "Labour market participation and mortgage related borrowing constraints," IFS Working Papers W04/09, Institute for Fiscal Studies.
    4. Attanasio, Orazio P., 1995. "The intertemporal allocation of consumption: theory and evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 42(1), pages 39-56, June.
    5. Laurent Gobillon & David Le Blanc, 2002. "L’impact des contraintes d’emprunt sur la mobilité résidentielle et les choix de statut d’occupation des ménages : un modèle simple de demande," Working Papers 2002-27, Center for Research in Economics and Statistics.

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