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Government Spending and Consumer Attitudes Toward Risk, Time Preference, and Intertemporal Substitution: An Econometric Analysis

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  • Hatzinikolaou, Dimitris
  • Ahking, Francis

Abstract

We construct a model that considers the direct effects, if any, of government spending on the attitudes of a typical consumer toward risk, time preference, and intertemporal substitution. The null hypothesis is that a growing government sector does not affect the consumer's behavior, and the alternative is that it causes him to become less risk averse, more impatient to consume now rather than in the future, and less responsive to changes in real interest rates. If the alternative hypothesis is correct, then government growth may lead to lower economic growth. Using Greek annual aggregate data, 1960-1990, we can reject the null hypothesis.

Suggested Citation

  • Hatzinikolaou, Dimitris & Ahking, Francis, 1995. "Government Spending and Consumer Attitudes Toward Risk, Time Preference, and Intertemporal Substitution: An Econometric Analysis," MPRA Paper 46164, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:46164
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    References listed on IDEAS

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    Cited by:

    1. Hatzinikolaou, Dimitris, 1999. "Modelling consumption: permanent-income or rule-of-thumb behaviour?," Economic Modelling, Elsevier, vol. 16(2), pages 293-306, April.
    2. Dimitris Hatzinikolaou, 1997. "Does government growth reduce precautionary saving?," Applied Economics, Taylor & Francis Journals, vol. 29(4), pages 419-423.
    3. Yamamura, Eiji, 2014. "Time preference and perceptions about government spending and tax: Smokers’ dependence on government support," MPRA Paper 55659, University Library of Munich, Germany.

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    More about this item

    Keywords

    risk; time preference; intertemporal substitution; consumption;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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