Consumption patterns over pay periods
Kelly, Clare, 1975- and Lanot, Gauthier (2002) Consumption patterns over pay periods. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.656).
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This paper establishes a theoretical framework to characterise the optimal behaviour of individuals who receive income periodically but make consumption decisions on a more frequent basis. The model incorporates price uncertainty and imperfect credit markets. The simulated
numerical solution to this model shows that weekly consumption functions are ordered such that the functions within the payment period are highest in the first and the last week of the payment cycle for all wealth levels. Using weekly expenditure data from the FES, we estimate the coefficient of relative risk aversion (point estimates are between 1.2 and 7) and the extent of measurement error in the data (which accounts for approximately 60% of the variance in the data).
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HB Economic Theory|
|Divisions:||Faculty of Social Sciences > Economics|
|Library of Congress Subject Headings (LCSH):||Consumption (Economics) -- Mathematical models, Liquidity (Economics), Uncertainty, Credit cards, Finance, Personal|
|Series Name:||Warwick economic research papers|
|Publisher:||University of Warwick, Department of Economics|
|Place of Publication:||Coventry|
|Official Date:||November 2002|
|Number of Pages:||42|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
ADANG P. and MELENBERG B. (1995). “Nonnegativity Constraints and Intratemporal Uncertainty in a Multi-good Life-cycle Model”, Journal of Applied Econometrics, 10, 1 – 15.
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