WEALTH, DISPOSABLE INCOME AND CONSUMPTION - Economics

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16 income growth on the real interest rate. Quantitatively, a positive 25-basispoint shock to net income growth (at quarterly rates), raises the cumulative growth factor by about 0.07 per cent. With the cumulative growth factors summarized in Table 3, a historical series for human wealth is constructed. First, it is determined what state of the system the economy was in at each point in time, and then the product XtΓ t is formed. The state of the economy is determined by picking the xˆ and the rˆ that are closest to the observed xt and rt in each period. The resulting series for human wealth is depicted in Figure 3. Figure 4 plots the annual estimates of human wealth reported by Beach, Boadway and Bruce as a basis of comparison. 320 000 300 000 280 000 260 000 240 000 220 000 200 000 180 000 160 000 Figure 3 Estimated real per capita human wealth 1965 1970 1975 1980 1985 1990
180 000 160 000 140 000 120 000 100 000 80 000 Figure 4 Beach, Boadway and Bruce’s estimated real per capita human wealth 1965 1970 1975 1980 1985 1990 The most striking feature of the human wealth series is that its average level has changed very little since the mid-1970s. This largely reflects three facts. First, the real interest rate was very low in the mid-1970s and reasonably high in the 1980s (Figure 1). Second, the level of government expenditures grew rapidly in the early 1980s, which lowered both the level and growth rate of net income over this period. Third, labour income fell sharply in the early 1980s as a result of the 1981–82 recession. Comparing Figures 3 and 4, we see that this measure of human wealth exhibits the same broad pattern as Beach, Boadway and Bruce’s measure. Both rise sharply between 1971 and 1973, decline through the mid-1970s and then rise again at the end of the decade. The principal difference between the two is that the decline in human wealth in the mid- 1970s is considerably more marked for the Beach, Boadway and Bruce series. 17
Page 1 and 2: November 1994 WEALTH, DISPOSABLE IN
Page 3: CONTENTS ACKNOWLEDGMENTS ..........
Page 7 and 8: ABSTRACT The author develops a meas
Page 9 and 10: 1 INTRODUCTION Empirical research o
Page 11 and 12: impact of fluctuations in the price
Page 13 and 14: 2 MEASURING WEALTH In a competitive
Page 15 and 16: ∞ 1 + xt + j Ht = Xt 1 + E ⎛ t
Page 17 and 18: 2.3 percentage points) between the
Page 19 and 20: The time-series properties of net i
Page 21 and 22: expectation operator. Instead, the
Page 23: Table 3 Cumulative growth factors u
Page 27 and 28: non-residential structures, machine
Page 29 and 30: 80 000 70 000 60 000 50 000 40 000
Page 31 and 32: 3 IS WEALTH USEFUL IN EXPLAINING CO
Page 33 and 34: contrast, appears to be trend-stati
Page 35 and 36: First, there is little evidence tha
Page 37 and 38: Both estimators correct for the end
Page 39 and 40: cointegrating parameters reported i
Page 41 and 42: consumption, disposable income and
Page 43 and 44: Table 8 Error-correction models for
Page 46 and 47: 38 0.5 0.0 -0.5 -1.0 0.8 0.6 0.4 0.
Page 48 and 49: 40 conventional levels. Presumably
Page 50 and 51: 42 0.5 0.0 -0.5 -1.0 0.6 0.4 0.2 0.
Page 53 and 54: 15 000 14 000 13 000 12 000 11 000
Page 55 and 56: 4 CONCLUSION The wealth measure dev
Page 57 and 58: APPENDIX 1: The data This appendix
Page 59 and 60: TAX = taxes net of transfers = (NET
Page 61 and 62: = FINAQ_CD+FINAQ_CC+FINAQ_OBDS + FI
Page 63 and 64: CPPQ = Canada Pension Plan. D162590
Page 65 and 66: RAC = average coupon rate = RAC(t-1
Page 67 and 68: APPENDIX 2: Closed-form solution fo
Page 69 and 70: APPENDIX 3: Wealth and its componen
Page 71: 87:2 356297.31 295864.21 60433.10 3
Page 74 and 75:
64 Flavin, M. A. 1981. “The Adjus
Page 76 and 77:
66 Perron, P. 1991. “Test Consist
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WEALTH, DISPOSABLE INCOME AND CONSUMPTION - Economics

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