Estimating and testing preferences for consumption, work hours and savings using the PSID, the profit function and the true dynamic budget constraint
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.
|Date of creation:||16 Dec 2003|
|Note:||Type of Document - word doc; prepared on Windows 2000; pages: 46; figures: 5. Word 2002 document|
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