Does Higher Transitory Income of Parents Permanently Increase the Income of Their Children?

While there are a number of issues in economics which are frequently scrutinized, the most important of them probably is the determination of a stable money demand function. Other issues in this regard relate to the choice between (i) broad vs. narrow definition of money; (ii) measured vs. permanent income; (iii) short-term vs. long-term interest rate; and (iv) inclusion of a variable for inflation or expected inflation. Quite recently, a new dimension has been added to the demand for money function. It is now argued that unanticipatory changes in the nominal money supply also affect the real demand for money. Darby (1972) has proposed that unanticipatory nominal money supply behaves as a shock-absorber in the money demand function. Initially, Laidler (1980) and then Carr and Darby (1981) formulated a shock-absorber model in which they have shown empirically that unanticipatory shocks in money supply positively affect the demand for money. Inclusion of this shock variable was justified by Darby (1972) on the ground that money balances serve as a buffer stock or shock-absorber which temporarily absorbs unexpected variations in income, especially the transitory income, until an adjustment is reached in adjusting the portfolio of securities and in consumer durable goods. The shock absorber model of Carr and Darby is based on the following two hypotheses:

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Job Displacement Insurance and (the Lack of) Consumption-Smoothing

The American Economic Review ◽

10.1257/aer.20190388 ◽

2021 ◽

Vol 111 (3) ◽

pp. 899-942

Author(s):

François Gerard ◽

Joana Naritomi

Keyword(s):

High Sensitivity ◽

Consumption Smoothing ◽

Job Displacement ◽

Severance Pay ◽

Lump Sum ◽

Transitory Income ◽

Income Shock ◽

Sources Of Variation ◽

Employment Data

We study the spending profile of workers who experience both a positive transitory income shock (lump-sum severance pay) and a negative permanent income shock (layoff). Using de-identified expenditure and employment data from Brazil, we show that workers increase spending at layoff by 35 percent despite experiencing a 14 percent long-term loss. We find high sensitivity of spending to cash-on-hand across consumption categories and for several sources of variation, including predictable income drops. A model with present-biased workers can rationalize our findings, and highlights the importance of the timing of benefit disbursement for the consumption-smoothing gains of job displacement insurance policies. (JEL D12, G51, J65, J63, O12)

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The Response of Italian Households to a Large Transitory Income Shock During an Economic Crisis: An Experimental Study on the Intention to Increase Consumption Levels

SSRN Electronic Journal ◽

10.2139/ssrn.2605746 ◽

2015 ◽

Author(s):

Luca Zanin

Keyword(s):

Experimental Study ◽

Economic Crisis ◽

Transitory Income ◽

Income Shock

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Schooling Decisions in Indonesia: a Lesson From Indonesian Crisis

Signifikan Jurnal Ilmu Ekonomi ◽

10.15408/sjie.v9i1.12479 ◽

2020 ◽

Vol 9 (1) ◽

pp. 81-92

Author(s):

Bayu Kharisma ◽

Ferry Hadiyanto ◽

Sutyastie Soemitro Remi

Keyword(s):

Secondary Education ◽

Resource Competition ◽

School Enrollment ◽

Dropping Out ◽

Schooling Decisions ◽

Conditional Logit ◽

Transitory Income ◽

Enrollment Rates ◽

Two Phases ◽

Senior Secondary

This research aims to analyze the role of income shocks, gender, and resource competition between siblings against the school's decision at the level of primary and senior secondary education during the economic crisis in Indonesia. Methods in this research were conducted in two phases, fixed effect and conditional logit. Results reveal that no evidence of households' transitory income affected children's education level, both for primary and senior secondary education. Meanwhile, compared to boys, girls have a higher probability of dropping out of school and have lower school enrollment rates in primary education. This paper indicated the existence of resource competition between the younger child and the older child for education, especially for senior secondary education.JEL Classification: I20, I24, I25, J16How to Cite:Kharisma, B., Hadiyanto, F., & Remi, S. S. (2020). Schooling Decision in Indonesia: a Lesson From Indonesian Crisis. Signifikan: Jurnal Ilmu Ekonomi, Vol. 9(1), 81-92. doi: http://dx.doi.org/10.15408/sjie.v9i1.12479.

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