Government Spending and Consumer Attitudes Toward Risk, Time Preference, and Intertemporal Substitution: An Econometric Analysis

Hatzinikolaou, Dimitris and Ahking, Francis (1995): Government Spending and Consumer Attitudes Toward Risk, Time Preference, and Intertemporal Substitution: An Econometric Analysis. Published in: Southern Economic Journal , Vol. 61, No. April 1995 (April 1995): pp. 1117-1126.

Abstract

We construct a model that considers the direct effects, if any, of government spending on the attitudes of a typical consumer toward risk, time preference, and intertemporal substitution. The null hypothesis is that a growing government sector does not affect the consumer's behavior, and the alternative is that it causes him to become less risk averse, more impatient to consume now rather than in the future, and less responsive to changes in real interest rates. If the alternative hypothesis is correct, then government growth may lead to lower economic growth. Using Greek annual aggregate data, 1960-1990, we can reject the null hypothesis.

• Item Type: MPRA Paper
• Language: English
• Keywords: risk, time preference, intertemporal substitution, consumption
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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