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Consumption, Uncertainty and Ricardian Equivalence

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Part of the Central Issues in Contemporary Economic Theory and Policy book series (CICETP)

Abstract

The Fisherian intertemporal utility maximization model has proved to be a rich source of hypotheses explaining consumption behavior. Both the Life Cycle Consumption Hypothesis (LCH) (Modigliani and Brumberg [20]; Modigliani et Al. [21]; Modigliani [19]) and the Permanent Income Hypothesis (PIH) (Friedman, [12]) share this heritage. The more recent rational expectations based Random Walk Hypothesis of consumption (RWHC) (Hall [13]) also comes out of this variant. However, there seems to be still another consumption hypothesis lurking in the Fisherian model. This emphasizes the role of uncertainty and makes a distinction between certain — or sure — income and uncertain income, and between certain — or sure — consumption needs and uncertain consumption needs. These distinctions lead to what might be dubbed as the Life Cycle Consumption-Uncertainty Hypothesis (LCC-UH).

Keywords

Current Income Future Income Wage Income Precautionary Saving Consumption Path 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© SIPI Srl. Rivista di Politica Economica 1993

Authors and Affiliations

  1. 1.McGill UniversityCanada

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