| This dissertation comprises three essays on consumption and saving.; 1. The prediction given by the life cycle model is that the individual is the economic decision-maker. According to this model, each individual maximizes his lifetime utility subject to his lifetime resources and does not share his resources with others. In contrast, the altruism model implies that the economic unit is a group comprised of altruistically-linked individuals. The individuals share their resources and maximize a joint utility function. Hence, altering the distribution of resources across these individuals will have no impact on their consumption. The extent of altruism inside marriage is examined with the 1980's BLS Consumer Expenditure Surveys. The test asks whether the distribution of consumption between husband and wife in a nuclear family depends on the distribution of resources between them. The findings provide evidence against the altruism model.; 2. The optimal consumption profiles of a life cycle individual for the durable good and the nondurable good when the adjustment to the stock of the durable good entails a fixed transactions cost are examined. The optimal sequencing of adjustments to the stock of the durable good are computed numerically. The sensitivity of these profiles to variations in the magnitude of transactions cost, the time preference rate, and the elasticity of substitution between durables and nondurables is examined. The combination of non-separable utility and fixed transactions costs results in optimum consumption profiles that do not satisfy Euler conditions.; 3. The predictions of the life cycle model, the infinite horizon altruism model, and a reduced form econometric model with respect to the impact of projected U.S. demographic change on future U.S. saving rates are compared. The findings for the different models indicate a great range of possible paths of future U.S. saving. However, the three models concur in predicting a peak in the U.S. national saving rate in the near future (within 15 years), followed by a significant decline in the saving rate thereafter. In fact, the findings suggest the strong possibility of negative U.S. saving rates beginning after 2030. |
