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Nonlinear Persistence and Partial Insurance: Income and Consumption Dynamics in the PSID

Arellano, M; Blundell, R; Bonhomme, S; (2018) Nonlinear Persistence and Partial Insurance: Income and Consumption Dynamics in the PSID. In: Proceedings of the 130th Annual Meeting of the American-Economic-Association (AEA), Volume 108. (pp. pp. 281-286). American Economic Association: USA: Philadelphia, PA. Green open access

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Abstract

In this paper we highlight the importance of the PSID in understanding income dynamics and consumption insurance. We explore the nonlinear nature of income shocks and describe a new quantile-based panel data framework for income dynamics. In this approach the persistence of past income shocks is allowed to vary according to the size and sign of the current shock. The model provides a good match with data and we confirm the results on population register data from Norway. Using the enhanced consumption and asset data in the PSID, nonlinear persistence is shown to have key implications for consumption insurance.

Type: Proceedings paper
Title: Nonlinear Persistence and Partial Insurance: Income and Consumption Dynamics in the PSID
Event: 130th Annual Meeting of the American-Economic-Association (AEA)
Location: Philadelphia, PA
Dates: 05 January 2018 - 07 January 2018
Open access status: An open access version is available from UCL Discovery
DOI: 10.1257/pandp.20181049
Publisher version: http://dx.doi.org/10.1257/pandp.20181049
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10061082
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