The consumption function when capital markets are imperfect: The permanent income hypothesis reconsidered

Oxford Economic Papers

Volumn 25, Issue 2, 1973, Pages 160-172

  Flemming, J S ^a  

^a NUFFIELD COLLEGE   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 0008589255     PISSN: 00307653     EISSN: None     Source Type: Journal    
DOI: 10.1093/oxfordjournals.oep.a041251     Document Type: Article

References (44)

1. M. S. Feldstein, P. J. Hammond, J. R. Hioks, M. FitzGerald Soott, D. W. Soakioe, G. C. Winston, and J. F. Wright for comments on previous drafts.
2. I M. Friedman, A theory of consumption function, NBER, Prinoeton, 1957, p. 238.
3. I M. Friedman, A theory of consumption function., p. 17.
4. As postulated by Friedman and many Keynesians: see, for example, A. Leijonhufvud, On Keynesian economics and the economics of Keynes, New York, 1988.
5. R. F. Kahn, ‘The relation of home investment to employment’, E.J., vol. 12, no. 162 (June 1931), pp. 173-98.
6. For Keyne”s acknowledgement of his debt to Kahn see J. M. Keynes, The general theory of employment, interest and money, London, 1936, pp. 113, 115, 119, 121.
7. Franco Modigliani, ‘Fluctuations in the saving-income ratio’, Studies in Income and Wealth, 11 (New York: NBER., 1949), p. 387.
8. N.B.P.I. Report No. 161, Hours of work, overtime and shiftworking, Cmnd. 4554 (1970), Appendix C ‘Relationship between hours of work, productivity and employment’, p. 114.
9. Appendix C ‘Relationship between hours of work, productivity and employment p. 3 where reference is made to Ulman’s contribution (Ch. VIII) to Caves (and associates), Britain's economic prospects, Brookings, Washington and London, 1968. Thoman studied the responsiveness of overtime hours in various U.K. industries to G.N.P.: but this odd analysis made no allowance for the two big changes in normal hours in 1959/60 and 1964/5 which were substantially offset by increases in overtime.
10. I. Nadiri and S. Rosen, ‘Interrelated factor demand functions’, AH.It. (59) 1969, pp. 457-71.
11. W.Y. Oi. ‘Labour a3 a quasi fixed factor’, J.P.E. 70 (1962), pp. 536-55.
12. F. P. R. Breohling and P. O’Brien, ‘Short run employment functions in manufacturing’, R.E. State, vol. 159, no. 3 (1967), pp. 277-87. This study of twelve countries (Austria, Belgium, Canada, France, Germany, Ireland, Italy, Netherlands, Norway, Sweden, U.K., and U.S.) suggests that, on average, 30 per cent of the divergence between desired employment (based on exogenous ‘normal’ hours-per-man) and actual employment is eliminated per quarter-50 per cent in sir months. The model assumes that the shortfall is made up by ‘transitory’ adjustment of hours. On the assumption that the elasticity of output with respect to employment and hours-per-man is the same these figures indicate that after six months the proportionate employment and hours responses would be equal-and the employment response predominate thereafter. In fact there are many reasons for expecting the elasticity of output with respect to hours-per-man to exceed that with respect to employment in whioh case the previous conclusion is strengthened. (See M. S. Feldstein, ‘Specification of the labour input in the aggregate production function’, R.E. Stud, xxxiv (1967), pp. 375-85.)
13. NBER., New York, 1905.
14. NBER., Table A-l.
15. NBER., Table A-5.
16. NBER., Table A-0.
17. NBER., Table 14, p. 52.
18. NBER., Table 11, p. 47.
19. NBER., Table 10, p. 45.
20. NBER., p. 3.
21. ‘Keynes and the olassios’ (I.E.A. London, 1909), p. 44.
22. Klein, ‘Keynes and the olassios’, Table 2, p. 23.
23. Keynes, p. 114. Notice the use of the word ‘employment* where ‘labour* would now be more conventional.
24. Kuznets, National product since 1869 and National income: A survey of findings, both NBER., 1946.
25. Friedman, p. 3;
26. J. R. Hicks, A contribution to the theory of the trade cycle, Oxford, 1950, p. 12.
27. Keynes, p. 114 (cited above).
28. Keynes described it as ‘fairly stable’ (p. 90) while Friedman writes ‘Keynes took it for granted that current consumption expenditure is a highly dependable and stable funotion of current income’ (p. 3) (emphasis added). See also Keynes’s discussion of cyclical effeots (p. 97) where he anticipates Duesenberry’s analysis of the role of habit in the short run.
29. J. S. Duesenberry, Income saving and the theory of consumer behaviour, Harvard, 1949.
30. J. S. Duesenberry, Income saving and the theory of consumer behaviour., p. 82.
31. J. S. Duesenberry, Income saving and the theory of consumer behaviour., pp. 78-81.
32. Friedman, pp. 146-50.
33. Modigliani, p. 391. Modigliani makes no references to dissaving or borrowing opportunities.
34. B. W. Clower, ‘The Keynesian counter-revolution’ in The theory of interest rates, the proceedings of an International Economio Association Conference at Boyaumont, France, 1962, edited by F. H. Hahn and F. P. B. Brechling. London, 1965, pp. 103-25.
35. A. Leijonhufvud, On Keynesian economics and the economics of Keynes, New York, 1968.
36. Clower, p. 120.
37. B. W. Clower and M. B. Johnson, ‘Income, wealth and the theory of consumption’ in Value, capital and growth, essays in honour of Sir John Hicks, edited by J. N. Wolfe, Edinburgh, 1968, pp. 45-96.
38. Hahn and Breohling(eds.), p. 301.
39. Hahn and Breohling (eds.), p. 308.
40. Leijonhufvud, p. 56.
41. Leijonhufvud., p. 57, footnote 15.
42. Published by the Institute of Economic Affairs, London, 1969.
43. Published by the Institute of Economic Affairs., p. 43.
44. Published by the Institute of Economic Affairs., pp. 42-4.