Published in:Netspar Discussion Paper ; No. 10/2010-060
Extent:
1 Online-Ressource (42 p)
Language:
English
DOI:
10.2139/ssrn.1716748
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 1, 2010 erstellt
Description:
A frequently employed test on the validity of the life cycle model is based on the orthogonality conditions implied by the first order condition of the problem: the Euler equation of consumption (Hall 1978). These tests usually rely on arbitrary assumptions on functional form, and hence, test the empirical validity of one specific parameterization of the model. In this paper I relax this requirement. I propose to measure the marginal rate of substitution between today’s and last period’s consumption directly, using self reported information on preferences. I reject the life cycle model with constant discount rates. The model with household specific discount rates is (only) borderline rejected