Abstract
This paper constructs and estimates a model of consumer preferences in which the intertemporal elasticity of substitution (IES) of consumption expenditure rises with the level of wealth. The purpose of this paper is to measure the effect that systematic variation in the IES of poor and rich consumers has on the IES of aggregate consumption expenditure. We find economically significant differences in the IES of poor and rich consumers in Indian panel data on the consumption of individual households. We also find economically significant differences in the IES measured in aggregate time series data for the U.S. and India.
Original language | English |
---|---|
Pages (from-to) | 507-534 |
Number of pages | 28 |
Journal | Journal of Monetary Economics |
Volume | 38 |
Issue number | 3 |
DOIs | |
Publication status | Published - 1996 Dec |
Externally published | Yes |
Keywords
- Consumption
- Necessary goods
- Subsistence levels
ASJC Scopus subject areas
- Finance
- Economics and Econometrics