The Consumption Response to Income Changes / Tullio Jappelli, Luigi Pistaferri.

Format:

Book

Author/Creator:

Jappelli, Tullio.

Contributor:

National Bureau of Economic Research.

Pistaferri, Luigi.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15739.

NBER working paper series no. w15739

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

We review different empirical approaches that researchers have taken to estimate how consumption responds to income changes. We critically evaluate the empirical evidence on the sensitivity of consumption to predicted income changes, distinguishing between the traditional excess sensitivity tests, and the effect of predicted income increases and income declines. We also review studies that attempt to estimate the marginal propensity to consume out of income shocks, distinguishing between three different approaches: identifying episodes in which income changes unexpectedly, relying on the covariance restrictions that the theory imposes on the joint behavior of consumption and income growth, and combining realizations and expectations of income or consumption in surveys where data on subjective expectations are available.

Notes:

Print version record

February 2010.