Understanding Consumption / Edition 1

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This book provides an overview of recent research on saving and consumption, a field in which substantial progress has been made over the last decade. Economists attempting to understand saving and consumption patterns have generated some of the best science in economics. For more than fifty years, there has been serious empirical and theoretical activity—never separating data, theory, and policy as has happened in many branches of economics. Research has drawn microeconomists interested in household behavior, as well as macroeconomists, for whom the behavior of aggregate consumption has always occupied a central role in explaining aggregate fluctuations. Econometricians have also made distinguished contributions, and there has been a steady flow of new methodologies by those working on saving and consumption, in time-series econometrics, as well as in the study of micro and panel data. A coherent account of these developments is presented here, emphasizing the interplay between micro and the macro, between studies of cross-section and panels, and those using aggregate time series data.

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Editorial Reviews

From the Publisher
"The objective of the book is to organize, evaluate, speculate, and inspire. On all counts, it succeeds magnificently, and undoubtedly will help speed the way toward the next landmark in this field."—Journal of Economic Literature

"A lucid and even entertaining introduction to modern research in consoumption...a valuable reference for anyone actively engaged in research in the area."—Southern Economic Journal

"The most impressive study on the economics of consumption to date....The superb structure of this book makes it an excellent text for an advanced course in economics of consumption and saving....The fascinating analysis and the exhaustive bibliography in this book make it a valuable source for all researchers, faculty, students, and anyone with special interest in the area of consumption and saving."—Journal of Consumer Affairs

"There has been a veritable explosion of econometric work on consumption in recent years...Deaton has been behind some of it and is on top of all of it. There is no better way to get up to date."—Alan S. Blinder, Princeton University

"The book does an impressive job of integrating the insights available from many sources, drawing on theory as well as econometric evidence, and micro as well as macro models. Understanding Consumption is lucid, intuitive, and eminently readable."—Marjorie Flavin, University of Virginia

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Product Details

  • ISBN-13: 9780198288244
  • Publisher: Oxford University Press
  • Publication date: 10/28/1992
  • Series: Clarendon Lectures in Economics Series
  • Edition description: New Edition
  • Edition number: 1
  • Pages: 256
  • Lexile: 1570L (what's this?)
  • Product dimensions: 9.13 (w) x 6.13 (h) x 0.58 (d)

Table of Contents

1 Theoretical Foundations 1
1.1 A simple model of intertemporal choice and the life cycle 2
1.2 On intertemporal preferences 6
1.3 Intertemporal choice 21
1.4 On the aggregation of individual behavior 37
2 Consumption, Growth, and Interest 44
2.1 Saving and growth 45
2.2 Saving and interest rates 59
3 Consumption and Permanent Income 76
3.1 A formal version of the permanent income hypothesis 80
3.2 The excess sensitivity of consumption 87
3.3 Consumption and permanent income: a first summary 101
4 The Volatility of Consumption 104
4.1 Measured income and permanent income 105
4.2 Is consumption too smooth? 112
4.3 Superior information, smoothness, and sensitivity 122
4.4 The volatility of consumption: a summary 133
5 Macroeconomics and Microeconomics 136
5.1 The permanent income hypothesis and the micro data 137
5.2 More microeconomic studies of intertemporal choice 148
5.3 Consumption interactions between households 163
5.4 The reconciliation of micro and macro evidence 167
5.5 Macroeconomics and microeconomics: a summary 175
6 New Directions: Beyond Permanent Income 177
6.1 Precautionary saving 177
6.2 Liquidity constraints 194
6.3 Precautionary saving versus liquidity constraints 212
7 Understanding Consumption 214
Bibliography 222
Index of Names 235
Index of Subjects 237
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