IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

The lambda model and "rule of thumb" consumers: An estimation problem in existing studies

  • Andersson, Fredrik W.
Registered author(s):

    Campbell and Mankiw's (1990) lambda model has frequently been used to estimate the fraction of rule of thumb consumers (i.e., consumers who do not smooth their consumption). However, the present note shows theoretically, as well as with a numerical illustration, that existing empirical applications of the lambda model imply a systematic underestimation of this fraction. The reason is that per capita values instead of aggregate values (which the model is designed for) are used.

    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.

    File URL: http://www.sciencedirect.com/science/article/pii/S1053535710001332
    Download Restriction: Full text for ScienceDirect subscribers only

    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.

    Article provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).

    Volume (Year): 40 (2011)
    Issue (Month): 4 (August)
    Pages: 381-384

    as
    in new window

    Handle: RePEc:eee:soceco:v:40:y:2011:i:4:p:381-384
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620175

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-46, April.
    2. Campbell, John Y & Mankiw, N Gregory, 1990. "Permanent Income, Current Income, and Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(3), pages 265-79, July.
    3. Agell, Jonas & Berg, Lennart, 1996. " Does Financial Deregulation Cause a Consumption Boom?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(4), pages 579-601, December.
    4. Johansson-Stenman, Olof, 2009. "Risk Aversion and Expected Utility of Consumption over Time," Working Papers in Economics 351, University of Gothenburg, Department of Economics.
    5. Yih-Luan Chyi & Chao-Hsi Huang, 1997. "An empirical study of the 'rule of thumb' consumption model in five East Asian countries," Applied Economics, Taylor & Francis Journals, vol. 29(10), pages 1271-1282.
    6. Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
    7. Nicholas Barberis & Ming Huang & Richard H. Thaler, 2006. "Individual Preferences, Monetary Gambles, and Stock Market Participation: A Case for Narrow Framing," American Economic Review, American Economic Association, vol. 96(4), pages 1069-1090, September.
    8. Cochrane, John H, 1989. "The Sensitivity of Tests of the Intertemporal Allocation of Consumption to Near-Rational Alternatives," American Economic Review, American Economic Association, vol. 79(3), pages 319-37, June.
    9. Shea, John, 1995. "Myopia, Liquidity Constraints, and Aggregate Consumption: A Simple Test," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 798-805, August.
    10. James C. Cox & Vjollca Sadiraj, 2008. "Risky Decisions in the Large and in the Small: Theory and Experiment," Experimental Economics Center Working Paper Series 2008-01, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
    Full references (including those not matched with items on IDEAS)

    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:eee:soceco:v:40:y:2011:i:4:p:381-384. 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: (Zhang, Lei)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.