haku: @author Quah, D. / yhteensä: 2
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| Tekijä: | Quah, D. |
| Otsikko: | Permanent and transitory movements in labor income: An explanation for "excess smoothess" in consumption |
| Lehti: | Journal of Political Economy
1990 : JUN, VOL. 98:3, p. 449-475 |
| Asiasana: | LABOUR INCOMES CONSUMPTION RATIONAL EXPECTATIONS |
| Kieli: | eng |
| Tiivistelmä: | Many have argued that if labor income is difference stationary, the permanent income hypothesis predicts that consumption should be relatively volatile. In USA aggregate data, labor income is well characterized as having a unit root; however, consumption turns out to be relatively smooth. This anomaly is known as Deaton's paradox. Deaton's paradox is resolved by providing decompositions of labor income into permanent and transitory components. These preserve the univariate dynamic properties of labour income. However, when agents distinguish permanent and transitory movements in their labor income the permanent income hypothesis correctly predicts the observed smoothness in consumption. |
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