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The Consumer Expenditure Function

In: Explorations in Economic Research, Volume 4, number 5

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  • Michael R. Darby

Abstract

A consumer expenditure function which integrates pure consumption and household investment in durable goods is formulated and estimated. Because of reduced reliance on the official classification of commodities as durable or nondurable, a considerable increase in ability to explain consumer expenditures results as compared to multiequation models. Further empirical investigation provides strong evidence that: (1) private sector income is significantly better than disposable personal income for explaining consumer expenditures, (2) the M1 definition of money is similarly superior to both M2 and M3 definitions, and (3) the weight of current income in permanent income is about 10% per annum. Data appendix included.
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Suggested Citation

  • Michael R. Darby, 1977. "The Consumer Expenditure Function," NBER Chapters, in: Explorations in Economic Research, Volume 4, number 5, pages 645-674, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberch:9106
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    References listed on IDEAS

    as
    1. Barro, Robert J, 1974. "Are Government Bonds Net Wealth?," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1095-1117, Nov.-Dec..
    2. Darby, Michael R, 1972. "The Allocation of Transitory Income Among Consumers' Assets," American Economic Review, American Economic Association, vol. 62(5), pages 928-941, December.
    3. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
    4. Raymond W. Goldsmith, 1962. "The National Wealth of the United States in the Postwar Period," NBER Books, National Bureau of Economic Research, Inc, number gold62-1.
    5. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-926, Sept./Oct.
    6. Kochin, Levis A, 1974. "Are Future Taxes Anticipated by Consumers? Comment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(3), pages 385-394, August.
    7. Milton Friedman & Anna Jacobson Schwartz, 1970. "Monetary Statistics of the United States: Estimates, Sources, Methods," NBER Books, National Bureau of Economic Research, Inc, number frie70-1.
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    Cited by:

    1. Michael R. Darby & Robert Gillingham & John S. Greenlees, 1991. "The Impact Of Government Deficits On Personal And National Saving Rates," Contemporary Economic Policy, Western Economic Association International, vol. 9(4), pages 39-55, October.
    2. James Smith & Michael Ward, 1980. "Asset Accumulation And Family Size," Demography, Springer;Population Association of America (PAA), vol. 17(3), pages 243-260, August.
    3. William Poole & Robert Eisner & Allen L Sinai & Michael R. Darby, 1989. "Challenges Of Macro Policy In The Open U.S. Economy," Contemporary Economic Policy, Western Economic Association International, vol. 7(1), pages 1-34, January.

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