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Consumption smoothing among working-class American families before social insurance

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  • John A. James
  • Michael G. Palumbo
  • Mark Thomas

Abstract

This paper examines the saving decisions of a large sample of turn-of-the-century working-class American families. We decompose each family's reported income into permanent and transitory components and then estimate marginal propensities to save from each component. Marginal propensities to save out of transitory income are large relative to the propensities based on permanent income, though the former lie much below one and the latter much above zero, remarkably similar to results based on contemporary data sets. Smoothing appears to have been primarily at medium rather than low frequencies, more consistent with precautionary than with life-cycle motives. Copyright 2007 , Oxford University Press.

Suggested Citation

  • John A. James & Michael G. Palumbo & Mark Thomas, 2007. "Consumption smoothing among working-class American families before social insurance," Oxford Economic Papers, Oxford University Press, vol. 59(4), pages 606-640, October.
  • Handle: RePEc:oup:oxecpp:v:59:y:2007:i:4:p:606-640
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    File URL: http://hdl.handle.net/10.1093/oep/gpm007
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    References listed on IDEAS

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    Cited by:

    1. Loretti Dobrescu & Mihaela Neamtu & Dumitru Opris, 2013. "Deterministic and Stochastic Three-Sector Dynamic Growth Model with Endogenous Labour Supply," The Economic Record, The Economic Society of Australia, vol. 89(284), pages 99-111, March.
    2. Motoi Kusadokoro & Takeshi Maru & Masanori Takashima, 2016. "Asset Accumulation in Rural Households during the Post-Showa Depression Reconstruction: A Panel Data Analysis," Asian Economic Journal, East Asian Economic Association, vol. 30(2), pages 221-246, June.

    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • N31 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - U.S.; Canada: Pre-1913

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