EconStor >
Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim >
ZEW Discussion Papers >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/29446
  
Title:Individual income, incomplete information, and aggregate consumption PDF Logo
Authors:Pischke, Jörn-Steffen
Issue Date:1991
Series/Report no.:ZEW Discussion Papers 91-07
Abstract:In this paper I study a model of life-cycle consumption in which individuals react optimally to their own income process but ignore economy wide information. Since individual income is less persistent than aggregate income consumers will react too little to aggregate income variation. Aggregate consumption will be excessively smooth. Since aggregate information is slowly incorporated into consumption, aggregate consumption will be autocorrelated and correlated with lagged income. The second part of the paper provides empirical evidence on individual and aggregate income processes and calibrates the model using the estimated parameters. The mode predictions roughly correspond to the empirical findings for aggregate consumption data. Allowing for the existence of measurement error in micro income, durables, finite lifetimes of consumers, and advance information improves the predictions of the model.
JEL:E21
Document Type:Working Paper
Appears in Collections:ZEW Discussion Papers
Publikationen von Forscherinnen und Forschern des ZEW

Files in This Item:
File Description SizeFormat
256560250.pdf1.84 MBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/29446

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.