A reconciliation of two alternative approaches towards buffer stock saving

Alexander Michaelides

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper shows that the two main models in the buffer stock saving literature can be nested in a model that varies the level of available social insurance. Equivalently, the assumption about the time series process for labor income (and social insurance during unemployment) is crucial in determining the level (but not the shape) of optimal consumption as a function of liquid wealth.

Keywords: buffer stock saving; precautionary savings motive; liquidity constraints; unemployment benefit. (search for similar items in EconPapers)
JEL-codes: D91 E21 (search for similar items in EconPapers)
Date: 2003-04
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Citations: View citations in EconPapers (3)

Published in Economics Letters, April, 2003, 79(1), pp. 137-143. ISSN: 0165-1765

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Journal Article: A reconciliation of two alternative approaches towards buffer stock saving (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:194

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