Should We Test The Life Cycle-Permanent Income Hypothesis With Food Consumption Data?

John Shea

No 292720, SSRI Workshop Series from University of Wisconsin-Madison, Social Systems Research Institute

Abstract: Most studies of household intertemporal consumption behavior use food consumption data from the Panel Study of Income Dynamics (PSID). A natural question is whether the intertemporal behavior of food consumption is typical of overall consumption. I address this question by examining the time-series behavior of food and other consumption series at the aggregate level. Unfortunately, I find that food is not typical: the life cycle-permanent income hypothesis can be easily rejected for most aggregate consumption series, but not for food. This suggests that tests of the LCH/PIH using PSID data are likely to have low power

Keywords: Research; Methods/Statistical; Methods (search for similar items in EconPapers)
Pages: 18
Date: 1993-01
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwssri:292720

DOI: 10.22004/ag.econ.292720

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