Economics, Econometrics and Finance
4 years ago

New Theory Reveals Why High-Income Households Save More Than Spend

SSRN Electronic Journal
The Relative Permanent Income Theory of Consumption: A Synthetic Keynes-Duesenberry-Friedman Model
Thomas I. Palley

Paper Summary

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The theory in the article combines ideas from Keynes, Duesenberry, and Friedman to explain how people spend money. It shows that rich people save more of their income than poor people. This helps understand why some people save more than others, even if they earn the same amount.