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The (In)validity of the Ricardian equivalence theorem-findings from a representative German population survey

Bernd Hayo () and Florian Neumeier ()

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: In this paper, we utilize data from a German population survey to test the validity of the Ricardian equivalence theorem (RET). In 2013, 2,000 representatively chosen people were asked whether they have altered their consumption and saving behavior in response to the significant increase in public debt that occurred between 2008 and 2012. Our findings reveal notable deviations from RET. However, we cannot rule out that the majority of Germans behave 'partly' in a Ricardian manner. This could either indicate a large fraction of rule-of-thumb or impatient consumers in the economy, or a widely prevalent mix of partially Ricardian and partially non-Ricardian behavior. Moreover, using multinomial logit regressions, we find that individuals' consumption responses are significantly related to their economic situation, time preferences, education, and age.

Date: 2017
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Published in Journal of Macroeconomics 51(2017): pp. 162-174

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Related works:
Journal Article: The (In)validity of the Ricardian equivalence theorem–findings from a representative German population survey (2017) Downloads
Working Paper: The (In)Validity of the Ricardian Equivalence Theorem – Findings from a Representative German Population Survey (2016) Downloads
Working Paper: The (In)Validity of the Ricardian Equivalence Theorem—Findings from a Representative German Population Survey (2016) Downloads
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