Consumption Smoothing Among Working-Class American Families Before Social Insurance

Posted: 2 Jul 2008

See all articles by John A. James

John A. James

University of Virginia (UVA) (deceased)

Michael Palumbo

Board of Governors of the Federal Reserve System

Mark Thomas

University of Virginia

Multiple version iconThere are 2 versions of this paper

Date Written: October 2007

Abstract

This paper examines the saving decisions of a large sample of turn-of-the-century working-class American families. We decompose each family's reported income into permanent and transitory components and then estimate marginal propensities to save from each component. Marginal propensities to save out of transitory income are large relative to the propensities based on permanent income, though the former lie much below one and the latter much above zero, remarkably similar to results based on contemporary data sets. Smoothing appears to have been primarily at medium rather than low frequencies, more consistent with precautionary than with life-cycle motives.

Keywords: JEL classifications: D91, E21, N31

Suggested Citation

James, John A. and Palumbo, Michael G. and Thomas, Mark, Consumption Smoothing Among Working-Class American Families Before Social Insurance (October 2007). Oxford Economic Papers, Vol. 59, Issue 4, pp. 606-640, 2007, Available at SSRN: https://ssrn.com/abstract=1154394 or http://dx.doi.org/10.1093/oep/gpm007

John A. James (Contact Author)

University of Virginia (UVA) (deceased)

Michael G. Palumbo

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-2296 (Phone)

Mark Thomas

University of Virginia

1400 University Ave
Charlottesville, VA 22903
United States

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