Econometrica Vol. 55 No. 3 1987
A Life-Cycle Consumption Model with Liquidity Constraints: Theory and Empirical Results
Abstract
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.
- DOI
- 10.2307/1913599
- Volume
- 55
- Issue
- 3
- Pages
- 533
- Sources
- bibtex:phds-export.bib openalex crossref