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Comparing the response of different education groups to predictable changes in income

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  • Grant, Charles

Abstract

The Permanent Income Hypothesis (PIH) can be tested using the excess-sensitivity test, which investigates whether current consumption is affected by predictable changes in income. Several studies have shown that households are overly sensitive to changes in current income, especially if they have low assets. This study shows that university educated households behave according to PIH, but that less educated households are excessively sensitive to predictable changes in income. This result is consistent with the idea that university-educated households are more patient.

Suggested Citation

  • Grant, Charles, 2025. "Comparing the response of different education groups to predictable changes in income," Journal of Macroeconomics, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:jmacro:v:84:y:2025:i:c:s0164070425000138
    DOI: 10.1016/j.jmacro.2025.103676
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    Keywords

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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