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Concave consumption functions -A closed-form characterization

Fischer, Thomas LU (2024) p.1-46
Abstract
This paper presents a closed-form expression for the concave consumption function in a model with liquidity constraints and spanned labor and capital income risk. Local Marginal Propensities to Consume (MPCs) and buffer-stock savings are analytically characterized allowing to identify its determinants. Solutions for common examples of the Hyperbolic Absolute Risk Aversion (HARA) class are presented and compared. Relative to the deterministic scenario, income risk makes consumption functions more concave and forces impatient individuals to form buffer-stock savings.
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Working paper/Preprint
publication status
published
subject
keywords
concave consumption function, marginal propensity to consume, liquidity constraint, buffer-stock savings, E21, G11
pages
1 - 46
publisher
SSRN
DOI
10.2139/ssrn.4735352
language
English
LU publication?
yes
id
9c292429-dad3-406d-98e0-accd380a81f6
date added to LUP
2025-02-28 15:56:51
date last changed
2025-04-04 15:16:27
@misc{9c292429-dad3-406d-98e0-accd380a81f6,
  abstract     = {{This paper presents a closed-form expression for the concave consumption function in a model with liquidity constraints and spanned labor and capital income risk. Local Marginal Propensities to Consume (MPCs) and buffer-stock savings are analytically characterized allowing to identify its determinants. Solutions for common examples of the Hyperbolic Absolute Risk Aversion (HARA) class are presented and compared. Relative to the deterministic scenario, income risk makes consumption functions more concave and forces impatient individuals to form buffer-stock savings.}},
  author       = {{Fischer, Thomas}},
  keywords     = {{concave consumption function; marginal propensity to consume; liquidity constraint; buffer-stock savings; E21; G11}},
  language     = {{eng}},
  note         = {{Working Paper}},
  pages        = {{1--46}},
  publisher    = {{SSRN}},
  title        = {{Concave consumption functions -A closed-form characterization}},
  url          = {{http://dx.doi.org/10.2139/ssrn.4735352}},
  doi          = {{10.2139/ssrn.4735352}},
  year         = {{2024}},
}