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Were Nineteenth-Century Industrial Workers Permanent Income Savers?

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  • Howard Bodenhorn

Abstract

Theories of household saving posit that households add to or draw down wealth to equalize the discounted presented value of consumption over time. This paper examines the extent to which nineteenth-century urban American industrial workers used saving and dissaving to smooth consumption in response to unanticipated, plausibly exogenous, shocks to income. Information on the expected and unexpected number of days unemployed is used to construct estimates of transitory income. The data are then used to estimate the marginal propensity to save from transitory income, and the results are broadly consistent with Friedman’s (1957) permanent income hypothesis.

Suggested Citation

  • Howard Bodenhorn, 2017. "Were Nineteenth-Century Industrial Workers Permanent Income Savers?," NBER Working Papers 23948, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:23948
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    References listed on IDEAS

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    1. Deaton, Angus, 1992. " Household Saving in LDCs: Credit Markets, Insurance and Welfare," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(2), pages 253-273.
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    3. Atack, Jeremy & Bateman, Fred & Margo, Robert A., 2002. "Part-Year Operation In Nineteenth-Century American Manufacturing: Evidence From The 1870 And 1880 Censuses," The Journal of Economic History, Cambridge University Press, vol. 62(03), pages 792-809, September.
    4. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters,in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
    5. Modigliani, Franco, 1986. "Life Cycle, Individual Thrift, and the Wealth of Nations," American Economic Review, American Economic Association, vol. 76(3), pages 297-313, June.
    6. Barro, Robert J, 1977. "Unanticipated Money Growth and Unemployment in the United States," American Economic Review, American Economic Association, vol. 67(2), pages 101-115, March.
    7. Alter, George & Goldin, Claudia & Rotella, Elyce, 1994. "The Savings of Ordinary Americans: The Philadelphia Saving Fund Society in the Mid-Nineteenth Century," The Journal of Economic History, Cambridge University Press, vol. 54(04), pages 735-767, December.
    8. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Journal of Economic Literature, American Economic Association, vol. 34(4), pages 1797-1855, December.
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    10. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, September.
    11. Paxson, Christina H, 1992. "Using Weather Variability to Estimate the Response of Savings to Transitory Income in Thailand," American Economic Review, American Economic Association, vol. 82(1), pages 15-33, March.
    12. Stanley L. Engerman & Robert E. Gallman, 1986. "Long-Term Factors in American Economic Growth," NBER Books, National Bureau of Economic Research, Inc, number enge86-1, September.
    13. Stanley L. Engerman & Robert E. Gallman, 1986. "Introduction to "Long-Term Factors in American Economic Growth"," NBER Chapters,in: Long-Term Factors in American Economic Growth, pages 1-6 National Bureau of Economic Research, Inc.
    14. 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.
    15. Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-247, February.
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    More about this item

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913

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