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Estimating and testing preferences for consumption, work hours and savings using the PSID, the profit function and the true dynamic budget constraint

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  • William Chin

    (IUPUI & Center on Philanthropy)

Abstract

Five waves of the Panel Study of Income Dynamics (PSID), 1985-1989 including both wealth supplements, are used to construct an intertemporal budget constraint for selected single headed households. A new functional form of the dual consumer profit function rationalizing consumption, labor supply and savings is specified, estimated and used to test commonly maintained separability hypotheses. Both consumption- labor and time separability are rejected. Cross-price Frisch elasticities are found not to equal zero and this in turns affects all estimates of consumption, labor supply and saving elasticities.

Suggested Citation

  • William Chin, 2003. "Estimating and testing preferences for consumption, work hours and savings using the PSID, the profit function and the true dynamic budget constraint," Microeconomics 0312005, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpmi:0312005
    Note: Type of Document - word doc; prepared on Windows 2000; pages: 46; figures: 5. Word 2002 document
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    References listed on IDEAS

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    More about this item

    Keywords

    intertemporal; consumption; labor; labour; wealth; savings; PSID; Panel Study of Income Dynamics; consumer profit function;
    All these keywords.

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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