The DOI matches its Crossref record.
Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence
Abstract
No one has derived closed-form solutions for consumption with stochastic labor income and constant relative risk aversion utility. A numerical technique is used here to give an accurate approximation to the solution. The resulting consumption function is often dramatically different than the certainty equivalence solution typically used, in which consumption is proportional to the sum of financial wealth and the present value of expected future income. The results help explain three important empirical consumption puzzles: excess sensitivity of consumption to transitory income, high growth of consumption in the presence of a low risk-free interest rate, and underspending of the elderly.
Overview
The claims and statistics of this paper haven’t been checked yet.
Run the check — free, no account needed. It reads the open-access text and checks the sources it cites.
Integrity signals
Registry
Cites
Statistics
Verification
Claims the paper makes
The claims and statistics of this paper haven’t been checked yet.
Run the check — free, no account needed. It reads the open-access text and checks the sources it cites.
Self-check
Percentages, sums and reported differences re-computed from the paper’s own numbers.
The self-check needs the paper’s full text.
Citations
Cited by
Precautionary Saving and Social Insurance
Hubbard, R. G., Skinner, J., & Zeldes, S. P. (1995) · Journal of Political Economy · doi:10.1086/261987 · Cited by 1,051
Self-citationInterest Rate Pass-Through: Mortgage Rates, Household Consumption, and Voluntary Deleveraging
Di Maggio, M., Kermani, A., Keys, B. J., Piskorski, T., Ramcharan, R., Seru, A., & Yao, V. (2017) · American Economic Review · doi:10.1257/aer.20141313 · Cited by 505
Using Expectations Data to Study Subjective Income Expectations
Dominitz, J., & Manski, C. F. (1997) · Journal of the American Statistical Association · doi:10.1080/01621459.1997.10474041 · Cited by 398
Gomes, F., Haliassos, M., & Ramadorai, T. (2021) · Journal of Economic Literature · doi:10.1257/jel.20201461 · Cited by 396
Stock Market Returns and Consumption
DI MAGGIO, M., KERMANI, A., & MAJLESI, K. (2020) · The Journal of Finance · doi:10.1111/jofi.12968 · Cited by 199
Metadata
- Authors
- Zeldes, S. P.
- Venue
- The Quarterly Journal of Economics
- Publisher
- Oxford University Press (OUP)
- Published
- 1989-05
- Volume
- 104
- Issue
- 2
- Pages
- 275
- ISSN
- 0033-5533 (ISSN-L)
- OpenAlex
- W2081308191
- Cited by
- 902
- References
- 0
- FWCI
- 80.21
- Type
- journal article
- Language
- en
- Open access
- closed
About these checks
Registry, retraction, Cites and statistics results are computed, not judged, with one exception: a printed reference that no index lists is read once by a model before it counts as a citation error. Claims are extracted by a model and kept only when their quote appears verbatim in the text; each cited source is then checked, with a model’s help, for whether it says what the claim relies on. Those verdicts can be wrong — read the claim’s quote and the cited source before relying on one.
Statistics and arithmetic are recomputed, not judged.
Confidence bands are shown only for fields calibrated on our annotated test set. None is calibrated yet, so no band is shown.
What counts as a claim ›How we measure confidence ›How we check this ›
Are you an author, or do you see a problem with this page? Request a review
How to cite
Cite CoChat for the checks on this page, and the paper for its own findings.
- This page
- CoChat. (2026). Citation check: Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence. https://app.cochat.ai/papers/10.2307/2937848
- The paper
- Zeldes, S. P. (1989). Optimal Consumption with Stochastic Income: Deviations from Certainty Equivalence. The Quarterly Journal of Economics. https://doi.org/10.2307/2937848
Data sources
Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
