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| Author: | Baxter, M. Jermann, U. |
| Title: | Household production and the excess sensitivity of consumption to current income |
| Journal: | American Economic Review
1999 : SEP, VOL. 89:4, p. 902-920 |
| Index terms: | ECONOMICS CONSUMPTION USA |
| Language: | eng |
| Abstract: | Empirical research on the permanent-income hypothesis (PIH) has found that consumption growth is excessively sensitive to predictable changes in income. This finding is interpreted as strong evidence against the PIH. The authors propose an explanation for apparent excess sensitivity that is based on a quantitative equilibrium model of household production in which permanent-income consumers respond to shifts in sectoral wages and prices by substituting work effort and consumption across home and market sectors. |
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