Access

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

How Does Future Income Affect Current Consumption?

Christopher D. Carroll
The Quarterly Journal of Economics
Vol. 109, No. 1 (Feb., 1994), pp. 111-147
Published by: Oxford University Press
Stable URL: http://www.jstor.org/stable/2118430
Page Count: 37
  • Download ($42.00)
  • Subscribe ($19.50)
  • Cite this Item
How Does Future Income Affect Current Consumption?
Preview not available

Abstract

This paper tests a straightforward implication of the basic Life Cycle model of consumption: that current consumption depends on expected lifetime income. The paper projects future income for a panel of households and finds that consumption is closely related to projected current income, but unrelated to predictable changes in income. However, future income uncertainty has an important effect: consumers facing greater income uncertainty consume less. The results are consistent with "buffer-stock" models of consumption like those of Deaton [1991] or Carroll [1992a, 1992b], where precautionary motives greatly reduce the willingness of prudent consumers to consume out of uncertain future income.

Page Thumbnails

  • Thumbnail: Page 
[111]
    [111]
  • Thumbnail: Page 
112
    112
  • Thumbnail: Page 
113
    113
  • Thumbnail: Page 
114
    114
  • Thumbnail: Page 
[115]
    [115]
  • Thumbnail: Page 
116
    116
  • Thumbnail: Page 
117
    117
  • Thumbnail: Page 
118
    118
  • Thumbnail: Page 
119
    119
  • Thumbnail: Page 
120
    120
  • Thumbnail: Page 
121
    121
  • Thumbnail: Page 
122
    122
  • Thumbnail: Page 
123
    123
  • Thumbnail: Page 
124
    124
  • Thumbnail: Page 
125
    125
  • Thumbnail: Page 
126
    126
  • Thumbnail: Page 
127
    127
  • Thumbnail: Page 
128
    128
  • Thumbnail: Page 
129
    129
  • Thumbnail: Page 
130
    130
  • Thumbnail: Page 
131
    131
  • Thumbnail: Page 
132
    132
  • Thumbnail: Page 
133
    133
  • Thumbnail: Page 
134
    134
  • Thumbnail: Page 
135
    135
  • Thumbnail: Page 
136
    136
  • Thumbnail: Page 
137
    137
  • Thumbnail: Page 
138
    138
  • Thumbnail: Page 
139
    139
  • Thumbnail: Page 
140
    140
  • Thumbnail: Page 
141
    141
  • Thumbnail: Page 
142
    142
  • Thumbnail: Page 
143
    143
  • Thumbnail: Page 
144
    144
  • Thumbnail: Page 
145
    145
  • Thumbnail: Page 
146
    146
  • Thumbnail: Page 
147
    147