We develop a panel unobserved components model of household income and consumption that can be estimated using full information methods. Maximum likelihood estimates for a simple version of this model suggests similar income risk, but higher consumption insurance relative to the partial information moments-based estimates of Blundell, Pistaferri, and Preston (2008) when using the same panel dataset. Bayesian model comparison supports this simple version of the model that only allows a spillover from permanent income to permanent consumption, but assumes no cointegration and no persistence in transitory components. At the same time, consumption insurance and income risk estimates are highly robust across different specifications.

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