Modeling Movements in Individual Consumption: A Time‐Series Analysis of Grouped Data

33 Pages Posted: 29 Oct 2014

See all articles by Orazio Attanasio

Orazio Attanasio

University College London - Department of Economics; Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Margherita Borella

University of Torino - Dipartimento di scienze economico-sociali e matematico-statistiche; CeRP - Collegio Carlo Alberto

Date Written: November 2014

Abstract

We characterize the time‐series properties of group‐level consumption, income, and interest rates using microdata. We relate the coefficients of moving average representations to structural parameters of theoretical models of consumption behavior. Using long time series of cross sections to construct synthetic panel data for the United Kingdom, we find that for high‐educated individuals the Euler equation restrictions are not rejected, the elasticity of intertemporal substitution is higher than one, and there is evidence of “excess smoothness” of consumption. Low‐educated individuals, conversely, exhibit excess sensitivity of consumption to past income, and the elasticity of intertemporal substitution is not statistically different from zero.

Suggested Citation

Attanasio, Orazio and Borella, Margherita, Modeling Movements in Individual Consumption: A Time‐Series Analysis of Grouped Data (November 2014). International Economic Review, Vol. 55, Issue 4, pp. 959-991, 2014. Available at SSRN: https://ssrn.com/abstract=2516094 or http://dx.doi.org/10.1111/iere.12079

Orazio Attanasio (Contact Author)

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
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+44 20 7679 5880 (Phone)
+44 20 7916 2775 (Fax)

Institute for Fiscal Studies (IFS)

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Margherita Borella

University of Torino - Dipartimento di scienze economico-sociali e matematico-statistiche ( email )

C. so Unione Sovietica, 218 Bis
Torino, 13820-4020
Italy

HOME PAGE: http://https://sites.google.com/site/margheritaborella/

CeRP - Collegio Carlo Alberto

Via Real Collegio, 30
Moncalieri, Turin
Italy
+39 011 647 6525 (Phone)
+39 011 640 3680 (Fax)

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