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A Life-cycle Consumption Model with Liquidity Contraints: Theory and Empirical Results

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  • Mariger, Randall P

Abstract

A structural consumption model incorporating endogenous liquidity constraints is fit to a cross section of 798 U.S. families. Liquidity constrained families are estimated to constitute 19.4 percent of the population sampled, a group that accounts for 16.7 percent of consumption in the population sampled. In-sample simulations of the model suggest that a temporary tax has three to four times more impact on aggregate consumption than it would if liquidity constraints were not in effect. Copyright 1987 by The Econometric Society.

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  • Mariger, Randall P, 1987. "A Life-cycle Consumption Model with Liquidity Contraints: Theory and Empirical Results," Econometrica, Econometric Society, vol. 55(3), pages 533-557, May.
  • Handle: RePEc:ecm:emetrp:v:55:y:1987:i:3:p:533-57
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