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Were Nineteenth-Century Industrial Workers Permanent Income Savers?

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  • Howard Bodenhorn

Abstract

Theories of household saving posit that households add to or draw down wealth to equalize the discounted presented value of consumption over time. This paper examines the extent to which nineteenth-century urban American industrial workers used saving and dissaving to smooth consumption in response to unanticipated, plausibly exogenous, shocks to income. Information on the expected and unexpected number of days unemployed is used to construct estimates of transitory income. The data are then used to estimate the marginal propensity to save from transitory income, and the results are broadly consistent with Friedman’s (1957) permanent income hypothesis.

Suggested Citation

  • Howard Bodenhorn, 2017. "Were Nineteenth-Century Industrial Workers Permanent Income Savers?," NBER Working Papers 23948, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:23948
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913

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