A structural consumption model incorporating endogenous liquidity constraints is fit to a cross section of 798 U.S. families. Liquidity constrained families are estimated to constitute 19.4 percent of the population sampled, a group that accounts for 16.7 percent of consumption in the population sampled. In-sample simulations of the model suggest that a temporary tax has three to four times more impact on aggregate consumption than it would if liquidity constraints were not in effect. Copyright 1987 by The Econometric Society.

Randall P. Mariger, Kathryn Shaw, Unanticipated Aggregate Disturbances and Tests of the Life-Cycle Consumption Model Using Panel Data, The Review of Economics and Statistics, Vol. 75, No. 1 (Feb., 1993), pp. 48-56