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A reconciliation of two alternative approaches towards buffer stock saving

Michaelides, Alexander (2003) A reconciliation of two alternative approaches towards buffer stock saving. Economics Letters, 79 (1). pp. 137-143. ISSN 0165-1765

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This paper shows that the two main models in the buffer stock saving literature can be nested in a model that varies the level of available social insurance. Equivalently, the assumption about the time series process for labor income (and social insurance during unemployment) is crucial in determining the level (but not the shape) of optimal consumption as a function of liquid wealth.

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Divisions: Financial Markets Group
Subjects: H Social Sciences > HB Economic Theory
JEL classification: D - Microeconomics > D9 - Intertemporal Choice and Growth > D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E21 - Macroeconomics: Consumption; Saving; Aggregate Physical and Financial Consumer Wealth
Date Deposited: 29 Jun 2006
Last Modified: 03 Jan 2024 23:09

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