Abstract
Food consumption in the Panel Study of Income Dynamics is used as a proxy for total consumption in many applications in economics, including tests of the permanent-income hypothesis, tests of separability between consumption and leisure, and tests of intergenerational altruism. Food, however, explains only a small fraction of the variation in total consumption. I propose a measure of composite consumption based on predicted wealth and compare it both to food consumption and to Skinner's (1987) measure of predicted consumption in a test of the permanent-income hypothesis. Using a log-linear intertemporal consumption function I find that food does not reject the permanent-income hypothesis but both Skinner's predicted consumption and the composite measure proposed here do reject the hypothesis.
Original language | English |
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Pages (from-to) | 201-216 |
Number of pages | 16 |
Journal | Journal of Monetary Economics |
Volume | 41 |
Issue number | 1 |
DOIs | |
State | Published - Feb 1998 |
Keywords
- Consumption
- Liquidity constraints
- Permanent-income hypothesis
ASJC Scopus subject areas
- Finance
- Economics and Econometrics