Crossley, Thomas F and Low, Hamish W (2011) IS THE ELASTICITY OF INTERTEMPORAL SUBSTITUTION CONSTANT? Journal of the European Economic Association, 9 (1). pp. 87-105. DOI https://doi.org/10.1111/j.1542-4774.2010.01001.x
Crossley, Thomas F and Low, Hamish W (2011) IS THE ELASTICITY OF INTERTEMPORAL SUBSTITUTION CONSTANT? Journal of the European Economic Association, 9 (1). pp. 87-105. DOI https://doi.org/10.1111/j.1542-4774.2010.01001.x
Crossley, Thomas F and Low, Hamish W (2011) IS THE ELASTICITY OF INTERTEMPORAL SUBSTITUTION CONSTANT? Journal of the European Economic Association, 9 (1). pp. 87-105. DOI https://doi.org/10.1111/j.1542-4774.2010.01001.x
Abstract
In all common models of inter-temporal allocation, the assumption of a constant elasticity of intertemporal substitution (EIS) imposes surprising limitations on within-period budget allocations. Consequently, the constant EIS assumption can be tested with demand data. In fact, the EIS is pinned down completely by the shape of Engel curves: if the EIS is constant then the EIS can be estimated without variation in the interest rate. That a price elasticity can be estimated without variation in the relevant price illustrates just how strong the constant EIS assumption is. The constant EIS assumption is rejected by demand data. © 2010 by the European Economic Association.
Item Type: | Article |
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Uncontrolled Keywords: | D91; E21; D12 |
Subjects: | H Social Sciences > HB Economic Theory |
Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Economics, Department of |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 04 Sep 2013 09:30 |
Last Modified: | 04 Dec 2024 05:59 |
URI: | http://repository.essex.ac.uk/id/eprint/7512 |