Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

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

Martin W Johansson
Additional contact information
Martin W Johansson: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

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

JEL-codes: E21

26 pages, February 4, 2002

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