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Measurement errors and the permanent income hypothesis: Evidence from rural India
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In this paper, an extension of Friedman's permanent income model by explicitly allowing for the distinction between pure measurement errors and transitory terms in the observed variables allows implementation of valid and direct tests of the permanent income hypothesis (PIH).Abstract:
An extension of Friedman's permanent income model by explicitly allowing for the distinction between pure measurement errors and transitory terms in the observed variables allows implementation of valid and direct tests of the permanent income hypothesis (PIH). These tests do not need the measurement error associated with each individual's income per se; rather, only the variance of these errors is necessary. The extended model also makes possible a correct comparison between the traditional and permanent income theory of consumer behavior. Neither hypothesis is supported in full. The contention of the PIH that measured consumption elasticities are downwardly biased estimates of the true permanent elasticities is supported by the data. The importance of the bias caused by measurement errors is revealed at all stages of the analysis. The large magnitude of error variances suggests that researchers should be more cautious than usual with one-shot survey data. Discussions of data and definitions used and the derivation of measurement error variances are appended. 14 references.read more
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The analysis of household surveys
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Consumption and Income Seasonality in Thailand
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A Theory of the Consumption Function
TL;DR: Friedman as mentioned in this paper proposed a new theory of the consumption function, tested it against extensive statistical J material and suggests some of its significant implications, including the sharp distinction between two concepts of income, measured income, or that which is recorded for a particular period, and permanent income, a longer-period concept in terms of which consumers decide how much to spend and how much they save.
Journal ArticleDOI
The Lognormal Distribution.
J. Aitchison,J. A. C. Brown +1 more
TL;DR: Lloyds Bank has its main root in a substantial private bank founded in Birmingham nearly two centuries ago; one hundred years ago this Bank still had only the one office in Birmingham, with a related private banking house in Lombard Street, and by amalgamation it has absorbed scores of other eighteenth and nineteenth century banks, both private and joint stock, and at least two of the former reach back into Restoration London, perhaps Cromwellian London.
Book
The lognormal distribution
TL;DR: Lloyds Bank has its main root in a substantial private bank founded in Birmingham nearly two centuries ago; one hundred years ago this Bank still had only the one office in Birmingham, with a related private banking house in Lombard Street, and by amalgamation it has absorbed scores of other eighteenth and nineteenth century banks, both private and joint stock, and at least two of the former reach back into Restoration London, perhaps Cromwellian London.
Journal ArticleDOI
On the Exact Variance of Products
TL;DR: In this paper, a simple exact formula for the variance of the product of two random variables, say, x and y, is given as a function of the means and central product-moments of x and Y. The usual approximate variance formula for xy is compared with this exact formula; e.g., the variance computed by the approximate formula is less than the exact variance, and the accuracy of the approximation depends on the sum of the reciprocals of the squared coefficients of variation of X and y.