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Franco Modigliani and the life-cycle theory of consumption

Author

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  • Angus Deaton

    () (Princeton University, Research Program in Development Studies and Center for Health and Wellbeing, Woodrow Wilson School, Princeton (USA))

Abstract

This paper reviews and discusses the contribution by Franco Modigliani to macroeconomic model building for economist forecasting and policy making. As Paul Samuelson observed, Modigliani's theoretical work was fundamental in the development of the basic framework within which the "post-Keynesian eclecticism" of the later twentieth century developed. In the move from theory to practice two aspects of Modigliani's work are considered: 1) the systemic approach that focuses on the relationship between the short and the long term, 2) the special reference to the mechanism of monetary policy transmission in the use of the macroeconomic model for economic stabilisation policy. What is left today of this contribution is finally briefly discussed, also with reference to some recent proposals on macroeconomic model building.

Suggested Citation

  • Angus Deaton, 2005. "Franco Modigliani and the life-cycle theory of consumption," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 58(233-234), pages 91-107.
  • Handle: RePEc:psl:bnlaqr:2005:28
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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9845/9730
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    References listed on IDEAS

    as
    1. Hall, Robert E, 1978. "Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 971-987, December.
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    Cited by:

    1. Mardi Dungey & Vitali Alexeev & Jing Tian & Alfred Michael Dockery & Sherry Bawa, 2015. "The Impact of Children on Australian Couples’ Wealth Accumulation," The Economic Record, The Economic Society of Australia, vol. 91, pages 139-150, June.
    2. Hippolyte d’ALBIS & Dalal MOOSA, 2015. "Generational Economics and the National Transfer Accounts," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 81(4), pages 409-441, December.
    3. Underwood, Anthony & Zahran, Sammy, 2015. "The carbon implications of declining household scale economies," Ecological Economics, Elsevier, vol. 116(C), pages 182-190.
    4. repec:eee:joecag:v:9:y:2017:i:c:p:185-207 is not listed on IDEAS
    5. Tullio Jappelli & Mario Padula & Luigi Pistaferri, 2008. "A Direct Test of The Buffer-Stock Model of Saving," Journal of the European Economic Association, MIT Press, vol. 6(6), pages 1186-1210, December.
    6. repec:chb:bcchec:v:20:y:2017:i:3:p:052-080 is not listed on IDEAS
    7. World Bank, 2015. "Searching for a New Silver Age in Russia," World Bank Other Operational Studies 22611, The World Bank.
    8. Korom, Philipp, 2017. "Ungleiche Mittelschichten: Über Unterschiede im Immobilienvermögen und im Erbe innerhalb der Mitte Deutschlands," MPIfG Discussion Paper 17/14, Max Planck Institute for the Study of Societies.
    9. Livio Di Matteo, 2016. "Wealth Distribution and the Canadian Middle Class: Historical Evidence and Policy Implications," Canadian Public Policy, University of Toronto Press, vol. 42(2), pages 132-151, June.
    10. Alfredo Schclarek & Mauricio Caggia, 2015. "Household Saving and Labor Informality: The Case of Chile," IDB Publications (Working Papers) 6946, Inter-American Development Bank.
    11. Vega-Lacorte, Juliana E. & Watkins-Fassler, Karen., 2013. "Crédito al consumo en Argentina durante periodos normales y de crisis económicas," Panorama Económico, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 0(16), pages 51-76, primer se.
    12. repec:eee:joecag:v:5:y:2015:i:c:p:45-53 is not listed on IDEAS
    13. Ryan, Mary & O'Donoghue, Cathal & Upton, Vincent & Handgraaf, Michael, 2015. "Heterogeneous Economic and Behavioural Drivers of the Farm Afforestation Decision," 89th Annual Conference, April 13-15, 2015, Warwick University, Coventry, UK 204237, Agricultural Economics Society.
    14. Foster, John, 2018. "The Consumption Function: A New Perspective," MPRA Paper 84383, University Library of Munich, Germany.
    15. Howard Bodenhorn, 2017. "Were Nineteenth-Century Industrial Workers Permanent Income Savers?," NBER Working Papers 23948, National Bureau of Economic Research, Inc.
    16. Alfredo Schclarek & Mauricio Caggia, 2015. "Household Saving and Labor Informality: The Case of Chile," IDB Publications (Working Papers) 89359, Inter-American Development Bank.

    More about this item

    Keywords

    Consumption; Life Cycle; Macroeconomics;

    JEL classification:

    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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