Economics at your fingertips  

On the Proportionality and Homogeneity of Consumption and Income

Avner Bar-ilan

Canadian Journal of Economics, 1995, vol. 28, issue 4b, 1153-60

Abstract: In its certainty equivalence form, consumption is proportional to the sum of human and non-human wealth. With labour income uncertainty the proportionality takes the form of homogeneity of consumption with respect to the components of wealth. In this paper we analyse the stochastic properties of labour income that yield the homogeneity property as the utility-maximizing solution. A sufficient condition is derived on the way in which a certain income shift preserves the homogeneity property. This condition can hold for some geometric processes where the logarithm of labour income is modelled as ARMA ('k, l'). For other income processes the response of consumption to a certain income innovation may be larger, which appears as excess sensitivity.

Date: 1995
References: Add references at CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
https://www.economic ... ionen/membership.php

Access Statistics for this article

Canadian Journal of Economics is currently edited by Katherine Cuff

More articles in Canadian Journal of Economics from Canadian Economics Association Canadian Economics Association Prof. Werrner Antweiler, Treasurer UBC Sauder School of Business 2053 Main Mall Vancouver, BC, V6T 1Z2. Contact information at EDIRC.
Bibliographic data for series maintained by Prof. Werner Antweiler ().

Page updated 2020-08-22
Handle: RePEc:cje:issued:v:28:y:1995:i:4b:p:1153-60