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

Does Consumption Respond to Predicted Increases in Cash-on-hand Availability? Evidence from the Italian “Severance Pay”

  • Margherita Borella

    ()

    (University of Turin and CeRP, Collegio Carlo Alberto, Turin)

  • Elsa Fornero

    ()

    (University of Turin and CeRP, Collegio Carlo Alberto, Turin)

  • Maria Cristina Rossi

    ()

    (Università di Roma, Tor Vergata and CeRP, Collegio Carlo Alberto, Turin)

This paper aims at detecting whether Italian households exhibit excess sensitivity in their consumption with regard to “severance pay”, a sizable, expected lump sum that workers receive at either retirement or whenever they leave their job for whatever reason. One of the implications of the life-cycle hypothesis is that consumption does not react when expected income changes are realized, as these are already incorporated by consumers into their (intertemporal) budget constraint. Should consumers exhibit a reaction to anticipated income changes this would be in contrast to one of the main implications of the life cycle hypothesis. Our analysis exploits a rotating panel data set of Italian households, the Survey of Household Income and Wealth (SHIW), for the years starting from 1989 to 2004. By using an Euler equation approach on different categories of consumption we estimate whether close to retirement households exhibit excess sensitivity of consumption with respect to severance pay.Our findings suggest that households do not alter their non-durable goods consumption while they increase their durable consumption in the year when they cash their severance pay.

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://cerp.unito.it/index.php/en/publications/working-papers/162-does-consumption-respond-to-predicted-increases-in-cash-on-hand-availability-evidence-from-the-italian-severance-pay
Our checks indicate that this address may not be valid because: 500 Can't connect to cerp.unito.it:80 (Bad hostname). If this is indeed the case, please notify (Silvia Maero)


Download Restriction: no

Paper provided by Center for Research on Pensions and Welfare Policies, Turin (Italy) in its series CeRP Working Papers with number 62.

as
in new window

Length: 19 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:crp:wpaper:62
Contact details of provider: Postal: Via Real Collegio 30, 10024 Moncalieri (TO)
Phone: 39 011 6705040
Fax: +39 011 6705042
Web page: http://www.cerp.carloalberto.org
Email:


More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

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:crp:wpaper:62. 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: (Silvia Maero)

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.