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Nonnegativity Constraints and Intratemporal Uncertainty in a Multi-good Life-Cycle Model

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  • Adang, Pim
  • Melenberg, Bertrand

Abstract

In a standard multi-good life-cycle consumption model (with intertemporal additive utility) the intratemporal relations between the marginal utilities of the different goods are deterministic. However, these deterministic identities will not usually be satisfied by the data. To avoid these deterministic relationships, we apply an approach which consists of introducing intratemporal uncertainty, and which is, in particular, interesting when additional nonnegativity constraints are present. We estimate some simple versions of the model with this so-called intratemporal uncertainty. The estimation results are, in general, in accordance with the theory, and most versions of the model are not rejected by Hansen and Singleton's misspecification test. Copyright 1995 by John Wiley & Sons, Ltd.

Suggested Citation

  • Adang, Pim & Melenberg, Bertrand, 1995. "Nonnegativity Constraints and Intratemporal Uncertainty in a Multi-good Life-Cycle Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(1), pages 1-15, Jan.-Marc.
    • Handle: RePEc:jae:japmet:v:10:y:1995:i:1:p:1-15
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    Cited by:

    1. Braekers, Roel & Van Keilegom, Ingrid, 2009. "Flexible modeling based on copulas in nonparametric median regression," Journal of Multivariate Analysis, Elsevier, vol. 100(6), pages 1270-1281, July.
    2. Einmahl, J.H.J. & van Keilegom, I., 2006. "Tests for Independence in Nonparametric Regression," Other publications TiSEM 0c6f2c43-aa7d-45c1-9d43-7, Tilburg University, School of Economics and Management.
    3. Park, Cheolwoo & Kang, Kee-Hoon, 2008. "SiZer analysis for the comparison of regression curves," Computational Statistics & Data Analysis, Elsevier, vol. 52(8), pages 3954-3970, April.
    4. Melenberg, Bertrand, 1997. "Life cycle consumption models with uncertainty within periods," Economics Letters, Elsevier, vol. 57(1), pages 1-4, November.
    5. Einmahl, J.H.J. & van Keilegom, I., 2004. "Goodness-of-fit Tests in Nonparametric Regression," Other publications TiSEM 44e08f75-b35d-424e-b33e-0, Tilburg University, School of Economics and Management.
    6. Kelley, Clare & Lanot, Gauthier, 2002. "Consumption Patterns Over Pay Periods," Economic Research Papers 269469, University of Warwick - Department of Economics.
    7. Einmahl, John H.J. & Van Keilegom, Ingrid, 2008. "Specification tests in nonparametric regression," Journal of Econometrics, Elsevier, vol. 143(1), pages 88-102, March.
    8. Melenberg, B., 1997. "Life cycle consumption models with uncertainty within periods," Other publications TiSEM afa31643-3995-476e-a1cf-d, Tilburg University, School of Economics and Management.

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