Behavioral scientists agree on the role of context on decisions (evaluation). In contrast, traditional consumption models assume that the preferences and expenditures of different consumers are independent. This study develops a simplified version of the Expenditure cascade model, a variant of the Relative income hypothesis, to establish and test the claim that spending behavior is influenced by contextual factors like income distribution. This simple model implies that the average propensity to consume (APC) evolves with changes in income distribution. Empirical results show that over the period 1947-2021, the APC in the United States moves together (“jointly”) with changes in income distribution, consistent with theoretical expectations.
Key words: Consumption models, APC, relative income hypothesis, time series analysis. JEL Codes: C51, D11, E21.
scite shows how a scientific paper has been cited by providing the context of the citation, a classification describing whether it supports, mentions, or contrasts the cited claim, and a label indicating in which section the citation was made.
The articles in Bibliomed are open access articles licensed under Creative Commons Attribution 4.0 International License (CC BY), which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. To view a copy of this licence, visit http://creativecommons.org/licenses/by/4.0/.
We use cookies and other tracking technologies to work properly, to analyze our website traffic, and to understand where our visitors are coming from. More InfoGot It!
