Abstract
We develop a model of consumption and income that allows for pervasive heterogeneity in the parameters of both processes. Introducing co-dependence 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 PSID, covering the period 1968 to 2009. We find considerable co-dependent 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.
Originalsprog | Engelsk |
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Tidsskrift | Journal of Political Economy |
Vol/bind | 126 |
Udgave nummer | 5 |
Sider (fra-til) | 1827-1864 |
ISSN | 0022-3808 |
DOI | |
Status | Udgivet - okt. 2018 |