A Microeconomic Model of Intertemporal Substitution and Consumer Demand

Richard Blundell (), Martin Browning and C. Mehgir

Department of Economics Working Papers from McMaster University

Abstract: In this paper we investigate the relationship between within-period preferences and the degree of intertemporal substitution. We first present a theoretical discussion which argues that the form of within-period preferences and the way these differ across consumers may have important consequences for the formulation and specification of intertemporal models. We then apply this methodology to a detailed study of disaggregate household expenditure patterns using a pooled cross-section of some 70,000 households across 15 years. Our objective is to assess the degree of intertemporal substitution across different household types avoiding aggregation bias and accounting for nonadditive within-period preferences and nonlinearity in Engel curves.

Pages: 40 pages
Date: 1989-02
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Citations: View citations in EconPapers (3)

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