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The Economics of ConsumptionTheory and Evidence$
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Tullio Jappelli and Luigi Pistaferri

Print publication date: 2017

Print ISBN-13: 9780199383146

Published to Oxford Scholarship Online: October 2017

DOI: 10.1093/acprof:oso/9780199383146.001.0001

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(p.273) Conclusions
The Economics of Consumption

Tullio Jappelli

Luigi Pistaferri

Oxford University Press

The final chapter summarizes the material covered by the book, offering our perspectives on areas of consent, disagreement, and future research. The book analyzes how consumers respond to changes in their economic environment and react to risks they face during the life cycle. In addressing these issues, the basic life-cycle permanent-income model is augmented with other significant features of consumers’ preferences and environment: precautionary motives for saving, borrowing constraints, life span uncertainty, intergenerational transfers, non-separability between consumption and leisure, habits, and financial sophistication. By and large, one can reconcile some puzzling facts present in the empirical data by means of relatively modest modifications of the basic version of the model, such as provision for home production and non-separable preferences between consumption and leisure. However, in order to explain other “anomalies” and “puzzles” observed in individuals’ actual saving and financial behaviors, more important modifications to the standard framework are required.

Keywords:   permanent-income model, life-cycle hypothesis, Euler equation, simulation studies, quasi-experimental studies, behavioral models

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