1. 1. A revised and expanded version of a paper given at the Textile Economics Workshop, Iowa State University, Ames, Iowa, June 15, 1982 . The participants of the workshop, as well as Jennifer Gerner and Cathleen Zick, made helpful comments.
2. Consumption Function Analysis in a Communal Household: Cross Section and Time Series
3. Economics and Consumer Behavior
4. 4. Recall that an ?elasticity? is simply an effect expressed in percentage terms, e.g. an income elasticity of demand is the percentage change in the quantity demanded due to a one per cent change in income, other independent variables being held constant, whereas a price elasticity of expenditure is the percentage change in the expenditure due to a one per cent change in price, holding other independent variables constant.
5. 5. In the absolute income hypothesis (10) is specified in terms of current consumption and current income and is usually estimated linearly as: (10a) C = a + bI where b is the marginal propensity to consume out of current income. In the permanent income hypothesis, (10) is specified in terms of permanent consumption Cp, and permanent income, Ip, and estimated as: (10b) Cp= kIpwhere k is the marginal propensity to consume out of permanent income. In the life-cycle income hypothesis, net wealth over the life-cycle is decomposed into current income, the present value of future expected income, Ie, and current net wealth, W and an equation like (10c) C = a0+a1I + a2Ie+ a3W is estimated. In (10c) a1, a2, and a3are the marginal propensities to consume out of current income, the present value of future expected income and current net wealth respectively.