Income and Consumption: A Micro Semistructural Analysis with Pervasive Heterogeneity
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Income and Consumption : A Micro Semistructural Analysis with Pervasive Heterogeneity. / Alan, Sule; Browning, Martin; Ejrnæs, Mette.
In: Journal of Political Economy, Vol. 126, No. 5, 10.2018, p. 1827-1864.Research output: Contribution to journal › Journal article › Research › peer-review
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TY - JOUR
T1 - Income and Consumption
T2 - A Micro Semistructural Analysis with Pervasive Heterogeneity
AU - Alan, Sule
AU - Browning, Martin
AU - Ejrnæs, Mette
PY - 2018/10
Y1 - 2018/10
N2 - We develop a model of consumption and income that allows for pervasive heterogeneity in the parameters of both processes. Introducing codependence between household income parameters and preference parameters, we also allow for heterogeneity in the impact of income shocks on consumption. We estimate the parameters of the model using a sample from the Panel Study of Income Dynamics, covering the period 1968–2009. We find considerable codependent heterogeneity in the parameters governing income and consumption processes. Our results suggest a great deal of heterogeneity in the reaction of consumption to income shocks, highlighting the heterogeneity in the self-insurance available to households.
AB - We develop a model of consumption and income that allows for pervasive heterogeneity in the parameters of both processes. Introducing codependence between household income parameters and preference parameters, we also allow for heterogeneity in the impact of income shocks on consumption. We estimate the parameters of the model using a sample from the Panel Study of Income Dynamics, covering the period 1968–2009. We find considerable codependent heterogeneity in the parameters governing income and consumption processes. Our results suggest a great deal of heterogeneity in the reaction of consumption to income shocks, highlighting the heterogeneity in the self-insurance available to households.
U2 - 10.1086/699186
DO - 10.1086/699186
M3 - Journal article
VL - 126
SP - 1827
EP - 1864
JO - Journal of Political Economy
JF - Journal of Political Economy
SN - 0022-3808
IS - 5
ER -
ID: 177392457