Home > Publications . Search All . Browse All . Country . Browse PSC Pubs . PSC Report Series

PSC In The News

RSS Feed icon

Prescott says sex offender registries may increase recidivism by making offender re-assimilation impossible

Frey says rising numbers of younger minority voters mean Republicans must focus on fiscal not social issues

Work by Garces and Mickey-Pabello cited in NYT piece on lack of black physicians

Highlights

Elizabeth Bruch wins Robert Merton Prize for paper in analytic sociology

Elizabeth Bruch wins ASA award for paper in mathematical sociology

Spring 2015 PSC newletter available now

Formal demography workshop and conference at UC Berkeley, August 17-21

Next Brown Bag

PSC Brown Bags will be back fall 2015


Melvin Stephens, Jr photo

The consumption response to predictable changes in discretionary income: Evidence from the repayment of vehicle loans

Publication Abstract

Stephens, Jr., Melvin. 2008. "The consumption response to predictable changes in discretionary income: Evidence from the repayment of vehicle loans." Review of Economics and Statistics, 90(2): 241-252.

Although the life cycle/permanent income hypothesis is the primary framework for understanding household consumption and savings decisions, only a few studies have used clearly identifiable income changes to test the basic predictions of the model. The estimates produced using this empirical strategy have yet to lead to a consensus of beliefs since the results have both favored and rejected the model. This paper contributes to this literature by examining the consumption reaction to predictable increases in discretionary income following the final payment of a vehicle loan. Using data from the Consumer Expenditure Survey, the results show that a 10% increase in discretionary income due to a loan repayment leads to a 2% to 3% increase in nondurable consumption. Additional analysis suggests that these findings may be explained by the presence of borrowing constraints.

DOI:10.1162/rest.90.2.241 (Full Text)

Licensed Access Link

Browse | Search : All Pubs | Next