Does Public Income Induce More Consumption?
The Life-Cycle/Permanent Income Hypothesis predicts that income uncertainty reduces an individual's incentive to consume, while holding permanent income level constant. This implies that switching from a relatively unstable form of income to a stable one motivates consumption. This article explores this implication by quantifying and comparing the marginal propensity to consume (MPC) out of private income and income from a public pension scheme. It exploits the introduction of a public pension that provides a monthly fixed amount of payment - a relatively secure source of income. The results suggest that the provision of pension leads to a higher MPC for the beneficiaries' households, and the estimated MPC out of the pension income is significantly larger than the corresponding estimate for private income. Further examination suggests that households facing more non-tradable risks appear to be more prudent on consumption, highlighting the role of income uncertainty in households' consumption decisions. Copyright © 2009 The Economic Society of Australia.
If you experience problems downloading a file, check if you have the proper application to view it first. 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 86 (2010)
Issue (Month): 272 (03)
Pages: 15-27
| Handle: | RePEc:bla:ecorec:v:86:y:2010:i:272:p:15-27 |
| Contact details of provider: | Postal: Phone: 61 3 9497 4140 Fax: 61 3 9497 4140 Web page: http://www.blackwellpublishing.com/journal.asp?ref=0013-0249Email: More information through EDIRC
|
| Order Information: | Web: http://www.blackwellpublishing.com/subs.asp?ref=0013-0249 |
No references listed on IDEAS
You can help add them by filling out this form.
This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.
When requesting a correction, please mention this item's handle: RePEc:bla:ecorec:v:86:y:2010:i:272:p:15-27. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)
or (Christopher F. Baum)If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.