NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Adaptive Consumption Behavior

Peter Howitt, Ömer Özak

NBER Working Paper No. 15427
Issued in October 2009
NBER Program(s):   EFG

This paper proposes and studies a theory of adaptive consumption behavior under income uncertainty and liquidity constraints. We assume that consumption is governed by a linear function of wealth, whose coefficients are revised each period by a procedure, which, although sophisticated, places few informational or computational demands on the consumer. We show that under a variety of settings, our procedure converges quickly to a set of coefficients with low welfare cost relative to a fully optimal nonlinear consumption function.

download in pdf format
   (3850 K)

email paper

This paper is available as PDF (3850 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w15427

Published: Howitt, Peter & Özak, Ömer, 2014. "Adaptive consumption behavior," Journal of Economic Dynamics and Control, Elsevier, vol. 39(C), pages 37-61.

Users who downloaded this paper also downloaded these:
Jappelli and Pistaferri w15739 The Consumption Response to Income Changes
Henderson and Newell w16529 Accelerating Energy Innovation: Insights from Multiple Sectors
Aghion and Howitt w3223 A Model of Growth Through Creative Destruction
Meghir and Pistaferri w15914 Earnings, Consumption and Lifecycle Choices
Aguiar and Bils w16807 Has Consumption Inequality Mirrored Income Inequality?
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us