TY  - JOUR
AU  - Cochrane,John H.
TI  - A Test of Consumption Insurance
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2642
PY  - 1992
Y2  - March 1992
UR  - http://www.nber.org/papers/w2642
L1  - http://www.nber.org/papers/w2642.pdf
N1  - Author contact info:
John H. Cochrane
Booth School of Business
University of Chicago
5807 S. Woodlawn
Chicago, IL  60637
Tel: 773/702-3059
Fax: 773/702-0458
E-Mail: john.cochrane@chicagobooth.edu
AB  - Are individuals effectively insured against idiosyncratic shocks to income or wealth by either formal or informal mechanisms? This paper shows that under perfect insurance, marginal utility should grow at the same rate for all consumers, and that the distribution of measured consumption growth rates should be independent of variables that are exogenous to the individual consumer when we allow for measurement error in consumption and for variation in preferences. This proposition is tested by cross sectional regressions of individual consumption growth on a variety of variables that should not be correlated with it under perfect insurance, including illness, being fired from a job, etc.
ER  -