This paper utilizes relatively unexplored Canadian provincial-level data to investigate an old but still relevant question in macroeconomics as to whether consumption responds to income innovations in a manner consistent with the stochastic implications of the permanent income hypothesis (PIH)....

Friedman's Permanent Income Hypothesis (PIH) predicts that the income elasticity of consumption should be higher for households for which a large fraction of the variation of their income is permanent than for households facing more transitory variations in income. We test this prediction using...

Data quality in the Penn World Tables varies systematically across countries that have different growth rates and are at different stages of economic development, thus introducing measurement error correlated with variables of economic interest. We explore this problem with three examples from...

This paper documents that region-level consumption exhibits excess sensitivity to lagged region-level income in Italy, Japan, Spain, the UK and West Germany. However, "region-specific" consumption exhibits substantially less sensitivity to lagged region-specific income. Moreover, excess...

Originally appeared in the Federal Reserve Bank of Philadelphia Business Review, May 1975. p. 19-31

We introduce a new measure of the extent of federal regulation in the U.S. and use it to investigate the relationship between federal regulation and macroeconomic performance. We find that regulation has statistically and economically significant effects on aggregate output and the factors that...

Endogenous growth requires that non-reproducible factors of production be either augmented or eliminated. Attention heretofore has focused almost exclusively on augmentation. In contrast, we study factor elimination. Maximizing agents decide when to reduce the importance of non-reproducible...