Intertemporal consumption, durables and liquidity constraints: a cohort analysis

Alessie, Rob, Devereux, Michael and Weber, Guglielmo (1997) Intertemporal consumption, durables and liquidity constraints: a cohort analysis. European Economic Review, 41 (1). pp. 37-59.


We provide a theoretical framework to analyse the response of life time maximizing consumers to intertemporal prices of non-durable goods and durable goods when the borrowing limit depends on the market value of the stock of durables owned by the consumer. We use pseudo panel data on purchases of non-durables and durable goods (cars) and demographic characteristics from the UK Family Expenditure Survey, as well as estimates of the durable stock constructed using the UK National Travel Survey, to estimate the equations derived in the first part of the paper. We evaluate the shadow prices of these restrictions, which were significantly positive for younger consumers in the mid-seventies and immediately prior to the 1982 financial liberalisation.

Item Type: Article
Keywords: Consumer durables; Liquidity constraints; Intertemporal consumer choice
Subject(s): Taxation
Centre: Oxford University Centre for Business Taxation
Date Deposited: 01 Dec 2011 16:19
Last Modified: 23 Oct 2015 14:06

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