Consumption Insurance or Consumption Mobility
Tullio Jappelli () and
Luigi Pistaferri ()
No 2148, CEPR Discussion Papers from C.E.P.R. Discussion Papers
The theory of full consumption insurance posits that households are insulated from all idiosyncratic shocks so that the ratio of the marginal utilities of consumption of any two households is constant over time. Consumption insurance therefore implies absence of consumption mobility between any two time periods. This implication requires knowledge of the evolution of the entire consumption distribution, not just its mean as in standard tests of complete markets. We test this unexplored prediction of the theory using a panel drawn from the Bank of Italy Survey of Household Income and Wealth. We design an appropriate non-parametric test and find substantial mobility of consumption even controlling for possible preference shifts and measurement error in consumption. The findings strongly reject the theory of full consumption insurance.
Keywords: Consumption Insurance; Mobility (search for similar items in EconPapers)
JEL-codes: D52 D91 I30 (search for similar items in EconPapers)
References: Add references at CitEc
Citations Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at firstname.lastname@example.org
Working Paper: Consumption Insurance or Consumption Mobility? (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: http://EconPapers.repec.org/RePEc:cpr:ceprdp:2148
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=2148
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ..
Series data maintained by ().