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Consumption and the permanent income of households

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  • Frish, Roni

Abstract

This study examines household consumption using data from the Israeli Consumer Expenditure (CE) Surveys and longitudinal administrative income records for 2004–16. The key findings challenge the Permanent Income Hypothesis (PIH) and the Life-Cycle Hypothesis (LCH): The propensity to consume out of income received after the CE survey is half that of income received before the survey. Households with higher income growth showed higher consumption growth. Households tend to consume a significant portion of transitory income straightaway. Finally, households without a pension plan show a marked decrease in consumption upon crossing the retirement age.

Suggested Citation

  • Frish, Roni, 2024. "Consumption and the permanent income of households," Research in Economics, Elsevier, vol. 78(4).
    • Handle: RePEc:eee:reecon:v:78:y:2024:i:4:s1090944324000759
    DOI: 10.1016/j.rie.2024.101011
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