This paper presents time series evidence on the importance of liquidity constraints in aggregate consumption expenditures. In contrast to previous studies, I find the proportion of consumption attributable to liquidity constrained behavior to be large and highly statistically significant. The estimation pays careful attention to the problems of stochastic consumption and temporal aggregation, and the estimates are shown to be robust to alternative specifications involving costly adjustment of consumption, public spending, and to stochastically varying rates of return.
Of the studies estimating marginal Social Security tax rates, some (Barro and Sahasakul, 1986; Seater, 1985; Stephenson, 1998) choose to ignore these benefi ts entirely. Among the studies that do include benefi ts are Blinder, Gordon and Wise (1980), Gordon (1983), Browning (1985), and Burkhauser and Turner (1985). Mitrusi and Poterba (2001) use Feldstein and Samwick's estimates of the marginal benefi ts. 2 The gap is greater still when comparing individuals at ages 21 and 64. In their unpublished appendix, Feldstein and Samwick found the gap to be seven percentage points for single males, eight for females and 9.4 for men with dependent spouses.
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