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Inference on Buffer-Stock Saving
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DOI：10.1002/jae.70048.png)
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Abstract
En 中文
There is an ongoing debate about the buffer-stock saving hypothesis. This paper develops a formal test of the hypothesis by examining the sub-unity of the marginal propensity to consume out of permanent income (MPCP). Our test relies on a novel estimator of the average derivative of a nonparametric consumption model, using constructed measures of latent permanent income shocks that accommodate nonparametric income distributions. Following Li and Vuong (1998), we use a Kotlarski-based approach to account for asymmetric errors, which is crucial for testing buffer-stock behavior. Applied to the US Panel Study of Income Dynamics (PSID) data, our test rejects a unit MPCP, providing empirical support for buffer-stock saving.
Keywords:
buffer-stock saving
deconvolution
Kotlarski's identity
permanent income hypothesis
Journal
J
IF:
3.1
Papers:
48
Citations:
8.0K