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Life-cycle consumption, precautionary saving, and risk sharing: an integrated analysis using household panel data

Life-cycle consumption, precautionary saving, and risk sharing: an integrated analysis using... AbstractThis paper presents an integrated model of household consumption behavior and examines its testable implications for various theories of consumption, using panel data on Korean households. The model is framed with an extended Euler equation by incorporating aggregate/idiosyncratic and anticipated/unanticipated income changes with aggregate and idiosyncratic income risk measures. The model can test seven restricted but competing hypotheses such as life-cycle and precautionary saving with and without liquidity constraints, complete risk sharing, and incomplete risk sharing with and without precautionary saving. Each alternative hypothesis is rejected in favor of the integrated model to explain households’ consumption behavior in the panel. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The B.E. Journal of Macroeconomics de Gruyter

Life-cycle consumption, precautionary saving, and risk sharing: an integrated analysis using household panel data

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Publisher
de Gruyter
Copyright
©2017 Walter de Gruyter GmbH, Berlin/Boston
ISSN
1935-1690
eISSN
1935-1690
DOI
10.1515/bejm-2016-0082
Publisher site
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Abstract

AbstractThis paper presents an integrated model of household consumption behavior and examines its testable implications for various theories of consumption, using panel data on Korean households. The model is framed with an extended Euler equation by incorporating aggregate/idiosyncratic and anticipated/unanticipated income changes with aggregate and idiosyncratic income risk measures. The model can test seven restricted but competing hypotheses such as life-cycle and precautionary saving with and without liquidity constraints, complete risk sharing, and incomplete risk sharing with and without precautionary saving. Each alternative hypothesis is rejected in favor of the integrated model to explain households’ consumption behavior in the panel.

Journal

The B.E. Journal of Macroeconomics – de Gruyter

Published: Jul 20, 2017

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