Modigliani–Brumberg model
E483086
The Modigliani–Brumberg model is an economic life-cycle theory explaining how individuals plan consumption and saving over their lifetimes to smooth living standards despite changing income.
Statements (48)
| Predicate | Object |
|---|---|
| instanceOf |
economic model
ⓘ
intertemporal choice model ⓘ life-cycle model ⓘ theory of consumption ⓘ |
| alsoKnownAs | life-cycle hypothesis ⓘ |
| assumes |
borrowing and lending at a market interest rate
ⓘ
finite lifetime ⓘ forward-looking individuals ⓘ no bequest motive in its basic form ⓘ rational expectations about lifetime resources ⓘ time-separable utility ⓘ utility maximization over the life cycle ⓘ |
| category |
economic theories of saving
ⓘ
intertemporal consumption models ⓘ |
| contrastsWith | current income hypothesis ⓘ |
| coreConcept |
consumption smoothing
ⓘ
dissaving in retirement ⓘ intertemporal budget constraint ⓘ lifetime income ⓘ permanent income ⓘ saving for retirement ⓘ |
| developer |
Franco Modigliani
NERFINISHED
ⓘ
Richard Brumberg NERFINISHED ⓘ |
| explains |
consumption patterns over the life cycle
ⓘ
saving behavior over the life cycle ⓘ wealth accumulation during working years ⓘ wealth decumulation during retirement ⓘ |
| field |
consumption theory
ⓘ
economics ⓘ household finance ⓘ macroeconomics ⓘ |
| hasExtension |
models with bequest motives
ⓘ
models with liquidity constraints ⓘ models with uncertainty about income and lifespan ⓘ |
| influenced |
macroeconomic saving models
ⓘ
modern consumption function estimation ⓘ pension economics ⓘ |
| mathematicalFormulation | intertemporal optimization problem ⓘ |
| objective | smoothing living standards over time ⓘ |
| originPeriod | 1950s ⓘ |
| predicts |
hump-shaped age-wealth profile
ⓘ
relatively smooth consumption despite fluctuating income ⓘ |
| publicationContext | essays on the life cycle hypothesis of saving ⓘ |
| relatedTo | Friedman permanent income hypothesis NERFINISHED ⓘ |
| timePerspective | lifetime planning ⓘ |
| usedIn |
analysis of fiscal policy effects on saving
ⓘ
analysis of social security systems ⓘ household consumption forecasting ⓘ |
Referenced by (1)
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