Article ID Journal Published Year Pages File Type
884199 Journal of Economic Behavior & Organization 2009 13 Pages PDF
Abstract

Euler equation estimation of intertemporal consumption models requires many, often unverifiable assumptions. These include assumptions on expectations and preferences. We aim at reducing some of these requirements by using direct subjective information on respondents’ preferences and expectations. The results suggest that individually measured welfare functions and expectations have predictive power for the variation in consumption across households. Furthermore, estimates of the intertemporal elasticity of substitution based on the estimated welfare functions are plausible and of a similar order of magnitude as other estimates found in the literature. The model favored by the data only requires cross-section data for estimation.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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