Consumers Are Not Ricardian: Evidence from Nineteen Countries

Paul Evans

Economic Inquiry, 1993, vol. 31, issue 4, 534-48

Abstract: The author develops a model that nests both Ricardian equivalence and an alternative non-Ricardian theory. The alternative is a stochastic variant of Blanchard's (1985) model and its empirical implications are derived. The author then tests Ricardian equivalence against this alternative using data from nineteen countries. Ricardian equivalence is resoundingly rejected. Moreover, the estimated deviation from Ricardian equivalence is roughly what one would expect if households faced perfect insurance markets and did not have altruistic bequest motives. For many purposes, however, the estimated deviation from Ricardian equivalence has no practical import. Copyright 1993 by Oxford University Press.

Date: 1993
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