Consumption and wealth: An international comparison

This paper derives the discrete-time counterpart of Blanchard's overlapping generations model of consumer expenditure. The model is combined with two different models of liquidity-constrained consumers; in the first the perce ntage of income accruing to such consumers is constant; in the second it is allowed to decrease over time. These models are estimated for five countri es over the period 1967-92, and pass all standard specifications as wen as some alternative non-parametric tests. Our estimates suggest that in Canada and the USA the number of liquidity-co nstrained consumers decreased substantially in the late 1970s and early 198 0s. In Germany and the UK these changes occurred later and were less pronou nced.