(1957) The
Permanent Income Hypothesis: Theory of Consumption Function.
Since this implies that consumption in any period is not determined by income in that period, but by the sum of lifetime income, the
permanent income hypothesis terms the right-hand side of this budget constraint 'permanent income', [Y.sup.P], and the difference between the right and the left-hand side, 'transitory income', [Y.sup.T], such that, at any given time, current income is the sum of permanent and transitory income:
Test of
permanent Income Hypothesis on Czech Voucher Privatization.
(3) The simple partial equilibrium
permanent income hypothesis implies that, conditional on initial assets, consumption is roughly proportional to the capitalized value of expected future labor income.
16), that with quadratic preferences the optimal saving and consumption rule satisfies the
permanent income hypothesis (PIH).
Degree of urbanization: As confirmed by Freidman's
permanent income hypothesis, rural residents tend to save more than urban residents because of the instability in income expectations in rural areas.
For all outcomes except health, the effect of a household permanent income shock is significant and declines across child age, as predicted by the
Permanent Income Hypothesis (PIH).
(4) Campbell and Mankiw (1991) separate the consumption behaviour of households into two parts as those individuals who follow the
permanent income hypothesis and those who simply consume their current income.
According to the
Permanent Income Hypothesis (Friedman 1957) and Life-Cycle Theory (Modigliani 1970), current consumption is a function of permanent income or wealth, not current income, and is assumed to be constant over the course of the life of an individual.
Several results here are consistent with the
permanent income hypothesis. The estimates suggest that expenditures on charitable giving respond strongly to persistent changes in income, while responding very little to transitory fluctuations in income.
accepted the
permanent income hypothesis of Milton Friedman, under which
In what came to be seen as a frontal assault on Keynesian economics, Friedman developed the
permanent income hypothesis in The Theory of the Consumption Function.