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Intertemporal choice and the cross-sectional variance of marginal utility

Attanasio, O.; Jappelli, T.; (2001) Intertemporal choice and the cross-sectional variance of marginal utility. The Review of Economics and Statistics , 83 (1) pp. 13-27. 10.1162/003465301750160009. Green open access

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Abstract

The theory of intertemporal choice predicts that the cross-sectional variance of the marginal utility of consumption is equal to its own lag plus a constant and a random component. Using general preference specifications and some assumptions about the nature of the random component, we provide an explicit test of this hypothesis. Our approach circumvents the necessity to identify a pure age profile of the cross-sectional variance of consumption and yields a well-specified statistical test. This test is applied to data from the United States, the United Kingdom, and Italy. The results are remarkably consistent with the restrictions implied by the theory of intertemporal consumption choices.

Type: Article
Title: Intertemporal choice and the cross-sectional variance of marginal utility
Open access status: An open access version is available from UCL Discovery
DOI: 10.1162/003465301750160009
Publisher version: http://dx.doi.org/10.1162/003465301750160009
Language: English
Additional information: © 2001 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology. Please see htpp://eprints.ucl.ac.uk/15220/ for the NBER Working Paper version, and http://eprints.ucl.ac.uk/15222/ for the CSEF Working Paper version
Keywords: JEL classification: D91, E21. Consumption
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/15221
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