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Author: | Pischke, J. |
Title: | Individual income, incomplete information, and aggregate consumption |
Journal: | Econometrica
1995 : JUL, VOL. 63:4, p. 805-840 |
Index terms: | INCOMES INFORMATION CONSUMPTION |
Language: | eng |
Abstract: | Individual income is much more variable than aggregate per capita income. The author argues that aggregate information is therefore not very important for individual consumption decisions and study models of life-cycle consumption in which individuals react optimally to their own income process but have incomplete or no information on economy-wide variables. Since individual income is less persistent than aggregate income consumers will react too little to aggregate income variation. |
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