IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v117y2012i1p99-101.html
   My bibliography  Save this article

On the concavity of the consumption function with the time varying discount rate

Author

Listed:
  • Gong, Liutang
  • Zhong, Ruquan
  • Zou, Heng-fu

Abstract

In this paper, we consider a finite-horizon model with the time-additive utility and the time varying discount rate. With the assumption of the concavity of absolute risk tolerance, the concavity of the consumption function has been proved. This result significantly broadens the conclusion of Carroll and Kimball (1996) for the case of the HARA utility function.

Suggested Citation

  • Gong, Liutang & Zhong, Ruquan & Zou, Heng-fu, 2012. "On the concavity of the consumption function with the time varying discount rate," Economics Letters, Elsevier, vol. 117(1), pages 99-101.
    • Handle: RePEc:eee:ecolet:v:117:y:2012:i:1:p:99-101
    DOI: 10.1016/j.econlet.2012.04.086
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176512002273
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2012.04.086?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-346, April.
    2. Carroll, Christopher D & Kimball, Miles S, 1996. "On the Concavity of the Consumption Function," Econometrica, Econometric Society, vol. 64(4), pages 981-992, July.
    3. Vasilev, Aleksandar & Maksumov, Rashid, 2010. "Critical analysis of Chapter 23 of Keynes’s Notes on Mercantilism in The General Theory of Employment, Interest and Money (1936)," EconStor Research Reports 155318, ZBW - Leibniz Information Centre for Economics.
    4. Shin-Ichi Nishiyama & Ryo Kato, 2011. "On the Concavity of the Consumption Function with a Quadratic Utility under Liquidity Constraints," TERG Discussion Papers 274, Graduate School of Economics and Management, Tohoku University.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jeanne Commault, 2024. "Heterogeneity in MPC Beyond Liquidity Constraints: The Role of Permanent Earnings," Working Papers hal-03870685, HAL.
    2. Toda, Alexis Akira, 2021. "Necessity of hyperbolic absolute risk aversion for the concavity of consumption functions," Journal of Mathematical Economics, Elsevier, vol. 94(C).
    3. Bah, Ibrahim Abubakarr, 2022. "Assessing Sierra Leone’s Consumption Function: A Cointegration and an Error Correction Model Approach," EconStor Preprints 266912, ZBW - Leibniz Information Centre for Economics.
    4. Liu, Haoyu & Li, Lun, 2023. "On the concavity of consumption function under habit formation," Journal of Mathematical Economics, Elsevier, vol. 106(C).
    5. Chen Shou & Xiang Shengpeng & He Hongbo, 2019. "Do Time Preferences Matter in Intertemporal Consumption and Portfolio Decisions?," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(2), pages 1-13, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lorenzo Casaburi & Jack Willis, 2018. "Time versus State in Insurance: Experimental Evidence from Contract Farming in Kenya," American Economic Review, American Economic Association, vol. 108(12), pages 3778-3813, December.
    2. Christopher D. Carroll & Edmund Crawley & Jiri Slacalek & Kiichi Tokuoka & Matthew N. White, 2020. "Sticky Expectations and Consumption Dynamics," American Economic Journal: Macroeconomics, American Economic Association, vol. 12(3), pages 40-76, July.
    3. Chipeniuk, Karsten O. & Katz, Nets Hawk & Walker, Todd B., 2022. "Households, auctioneers, and aggregation," European Economic Review, Elsevier, vol. 141(C).
    4. Seungjun Baek & Seongeun Kim & Tae-hwan Rhee & Wonmun Shin, 2023. "How effective are universal payments for raising consumption? Evidence from a natural experiment," Empirical Economics, Springer, vol. 65(5), pages 2181-2211, November.
    5. J. Anthony Cookson & Erik P. Gilje & Rawley Z. Heimer, 2020. "Shale Shocked: Cash Windfalls and Household Debt Repayment," NBER Working Papers 27782, National Bureau of Economic Research, Inc.
    6. Toda, Alexis Akira, 2021. "Necessity of hyperbolic absolute risk aversion for the concavity of consumption functions," Journal of Mathematical Economics, Elsevier, vol. 94(C).
    7. Maude Toussaint‐Comeau, 2021. "Liquidity constraints and debts: Implications for the saving behavior of the middle class," Contemporary Economic Policy, Western Economic Association International, vol. 39(3), pages 479-493, July.
    8. Sydney Ludvigson & Christina H. Paxson, 2001. "Approximation Bias In Linearized Euler Equations," The Review of Economics and Statistics, MIT Press, vol. 83(2), pages 242-256, May.
    9. Reto Foellmi, 2008. "Inequality and aggregate savings in the neoclassical growth model," IEW - Working Papers 395, Institute for Empirical Research in Economics - University of Zurich.
    10. Yunho Cho & James Morley & Aarti Singh, 2024. "Did marginal propensities to consume change with the housing boom and bust?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 39(1), pages 174-199, January.
    11. Shuhei Aoki & Makoto Nirei, 2016. "Pareto Distribution of Income in Neoclassical Growth Models," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 20, pages 25-42, April.
    12. Andrea Butelmann P & Francisco Gallego, 2000. "Household Saving in Chile: Microeconomic Evidence," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 3(1), pages 5-24, April.
    13. Giovanni L. Violante & Greg Kaplan, 2022. "The Marginal Propensity to Consume in Heterogeneous Agent Models," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 747-775, August.
    14. Pedro Trivin, 2022. "The wealth-consumption channel: evidence from a panel of Spanish households," Review of Economics of the Household, Springer, vol. 20(4), pages 1377-1428, December.
    15. Li, Geng, 2009. "Transaction costs and consumption," Journal of Economic Dynamics and Control, Elsevier, vol. 33(6), pages 1263-1277, June.
    16. Sydnee Caldwell & Scott Nelson & Daniel Waldinger, 2023. "Tax Refund Uncertainty: Evidence and Welfare Implications," American Economic Journal: Applied Economics, American Economic Association, vol. 15(2), pages 352-376, April.
    17. Luis M. Viceira, 2001. "Optimal Portfolio Choice for Long‐Horizon Investors with Nontradable Labor Income," Journal of Finance, American Finance Association, vol. 56(2), pages 433-470, April.
    18. Orazio P. Attanasio, 1998. "Consumption Demand," NBER Working Papers 6466, National Bureau of Economic Research, Inc.
    19. Karsten O. Chipeniuk & Nets Hawk Katz & Todd Bruce Walker, 2022. "Households, Auctioneers, and Aggregation," CAEPR Working Papers 2022-005 Classification-E, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    20. Campbell, J.R. & Hercowitz, Zvi, 2018. "Liquidity Constraints of the Middle Class (revision of CentER DP 2015-009)," Discussion Paper 2018-039, Tilburg University, Center for Economic Research.

    More about this item

    Keywords

    Consumption function; Concavity; Risk tolerance;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:117:y:2012:i:1:p:99-101. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.