PRECAUTIONARY SAVING AND THE DEATON PARADOX

Authors
NORMANDIN M
Citation
M. Normandin, PRECAUTIONARY SAVING AND THE DEATON PARADOX, Applied economics letters, 4(3), 1997, pp. 187-190
Citations number
9
Categorie Soggetti
Economics
Journal title
Applied economics letters → ACNP
ISSN journal
13504851
Volume
4
Issue
3
Year of publication
1997
Pages
187 - 190
Database
ISI
SICI code
1350-4851(1997)4:3<187:PSATDP>2.0.ZU;2-1
Abstract
The Deaton paradox implies that the permanent income hypothesis (PM) u nder certainty equivalence is rejected because observed consumption is excessively smooth. It is shown how several reasonable parametrizatio n of the PM under precautionary saving imply that consumption is smoot her than labour income and that the relative smoothness matches that f ound in the data.