Is Consumption Growth Consistent with Intertemporal Optimization? Evidence from the Consumer Expenditure Survey

Orazio P. Attanasio, Guglielmo Weber

NBER Working Paper No. 4795
Issued in July 1994
NBER Program(s):Economic Fluctuations and Growth

In this paper we show that some of the predictions of models of consumer intertemporal optimization are not inconsistent with the patterns of non-durable expenditure observed in US household-level data. Our results and our approach are new in several respects. First, we use the only US micro data set which has direct and complete information on household consumption. The microeconomic data sets used in most of the consumption literature so far contained either very limited information on consumption (like the PSID) or none at all, in which case consumption had to be obtained indirectly from income and changes in assets. Second, we propose a flexible and novel specification of preferences which is easily estimable and allows a general treatment jof multiple commodities. We show that aggregation over commodities can be important, both theoretically and in practice. Third, we present empirical results that show that it is possible to find a reasonably simple specification of preferences, which controls for the effects of changes in demographics and labor supply behavior over the life cycle and which is not rejected by the available data. On our preferred specification, we obtain sharp estimates of key behavioral parameters (including the elasticity of intertemporal substitution) and no rejections of theoretical restrictions. Our results contrast sharply with most of the previous evidence, which has typically been interpreted as rejection of the theory. We show that previous rejections can be explained by the simplifying assumptions made to derive empirically tractable equations. We also show that results obtained using food consumption or aggregate data can be extremely misleading.

download in pdf format
   (484 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w4795

Published: Journal of Political Economy, 1992. citation courtesy of

Users who downloaded this paper also downloaded* these:
Attanasio and Browning w4453 Consumption over the Life Cycle and over the Business Cycle
Carroll and Summers Consumption Growth Parallels Income Growth: Some New Evidence
Fernández-Villaverde and Krueger w9382 Consumption over the Life Cycle: Facts from Consumer Expenditure Survey Data
Campbell and Mankiw Consumption, Income and Interest Rates: Reinterpreting the Time Series Evidence
Attanasio and Weber w15756 Consumption and Saving: Models of Intertemporal Allocation and Their Implications for Public Policy
NBER Videos

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

Contact Us