The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households

@inproceedings{Hall1980TheSO,
  title={The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households},
  author={R. Hall and Frederic S. Mishkin},
  year={1980}
}
We investigate the stochastic relation between income and consumption (specifically, consumption of food) within a panel of about 2,000 households. Our major findings are: 1. Consumption responds much more strongly to permanent than to transitory movements of income. 2. The response to transitory income is nonetheless clearly positive. 3. A simple test, independent of our model of consumption, rejects a central implication of the pure life cycle-permanent income hypothesis. The observed… Expand
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