The Markov Consumption Problem

Michael Sattinger

Discussion Papers from University at Albany, SUNY, Department of Economics

Abstract: The paper derives the solution to a simple stochastic continuous-time dynamic control problem in which a consumer determines consumption and saving while moving between employment and unemployment according to a Markov process. The results differ from the permanent income hypothesis and some of Hall's 1978 results based on autoregressive income shocks.

Date: 2010
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Related works:
Journal Article: The Markov consumption problem (2011)
Working Paper: The Markov Consumption Problem (2010)
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