COMPARATIVE STATICS FOR DYNAMIC-MODELS - EMPIRICAL IMPLICATIONS OF THE FRISCH DECOMPOSITION

In this paper, I establish a link between static and dynamic models us ing a new set of results related to the Frisch demand function and a g eneralization of the Frisch decomposition of demand (which is an alter native to the familiar Slutsky decomposition). It was previously belie ved that estimates obtained from static models do not directly provide implications for life-cycle behavior. However, I develop a methodolog y for inferring intertemporal elasticities of substitution in a dynami c system from parameter estimates of an ''appropriate'' static system. This methodology applies to general multi-constraint optimization pro blems where some constraints may be nonlinear.