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The Empirical Test Of Life Cycle Hypothesis Of Consumption

The Empirical Test Of Life Cycle Hypothesis Of Consumption
Ferry Hadiyanto
Universitas Padjadjaran, Journal of Faculty Of Economics Padjadjaran University Economic Journal Volume. 23, No. 2 September 2008 ISSN 0854-1493
Inggris
Universitas Padjadjaran, Journal of Faculty Of Economics Padjadjaran University Economic Journal Volume. 23, No. 2 September 2008 ISSN 0854-1493

The consumption and income relation using ILFS data weakly show to follow life cycle hypothesis that consumption track in line with income path and household does dissaving in early ages then saw in the productive ages especially for year 2000. People before the time has experiences that the economy certainly grew in stabilization therefore no buffer stock of saving needed. After experienced the crisis periods they realize that the economy will be uncertain then precautionary saving should be done by reducing average propensity to consume and become risk adverse. The problem of unsophisticated model estimation results are assumed arise from pseudo-panel data of ILFS that have many infirmities that basically end up with heteroscedasticity and bias data sample selectivity.

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