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Department of Economics, Lund University Working Papers, Department of Economics, Lund University

No 2002:2:
Reexamining loss aversion in aggregate consumption - Swedish and international evidence

Martin W Johansson

Abstract: Recent empirical and theoretical studies have suggested that consumption growth reacts asymmetrically to positive and negative expected income growth. In this paper we investigate if this behavior is robust to a) assumptions on how the households form their expectations of future earnings and b) sampling frequency. After investigating the case for Swedish consumption using survey data and a panel of annual observations on 15 OECD countries we conclude that previous results can not easily be generalized

Keywords: Permanent income hypothesis; Propsect theory; Loss aversion; Survey data; (follow links to similar papers)

JEL-Codes: E21; (follow links to similar papers)

26 pages, February 4, 2002

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