Testing the stochastic implications of the life cycle-permanent income hypothesis using U.K. regional time-series data

Robert Gausden, I. Whitfield

    Research output: Contribution to journalArticlepeer-review

    Abstract

    This paper applies exclusion tests of the pure life cycle—permanent income hypothesis (LCPIH) to time-series data on each of the eleven standard regions of the UK. Data are annual and extend from 1975 to 1994. The results obtained suggest that there are considerable differences in consumption behaviour across the regions. Theory has indicated that a departure of consumption behaviour from that predicted by the LCPIH can occur because of a change in unemployment. Consequently, a comparison is undertaken of the empirical results obtained for the eleven regions and the respective unemployment movements. Following this comparison, it is possible to conclude that the contrasting unemployment experiences of the regions of the UK have contributed significantly to, yet cannot account for fully, the observed differences in consumption behaviour.
    Original languageEnglish
    Pages (from-to)1299-1310
    Number of pages12
    JournalApplied Economics
    Volume32
    Issue number10
    DOIs
    Publication statusPublished - 2000

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