@techreport{NBERw5788,
 title = "Buffer-Stock Saving and the Life Cycle/Permanent Income Hypothesis",
 author = "Christopher D. Carroll",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "5788",
 year = "1996",
 month = "October",
 URL = "http://www.nber.org/papers/w5788",
 abstract = {This paper argues that the typical household's saving is better described by a traditional version of the Life Cycle/Permanent Income Hypothesis (LC/PIH) model.  Buffer-stock behavior emerges if consumers with important income uncertainty are sufficiently impatient.  In the traditional model, consumption growth is determined solely by tastes; in contrast, buffer-stock consumers set average consumption growth equal to average labor income growth, regardless of tastes.  The model can explain three empirical puzzles: the [1991]; the the 1930's; and the temporal stability of the household age/wealth profile despite the unpredictability of idiosyncratic wealth changes.},
}