Alexandre Dmitriev | University of Tasmania 

Our model reconciles with the data by closing the gap between cross-country correlations of consumption and output ('quantity anomaly'). The model predicts positive international correlations in investment and employment of the magnitude observed in the data ('international co-movement puzzle'). The key ingredient is the preference ordering that implies internal habit formation over the composite of consumption and leisure.

These lifestyle habits:

  1. reduce wealth effect on labor supply, which helps explain co-movement of employment and output
  2. reduce Edgeworth substitutability between consumption and leisure, which helps explain co-movement of consumption
  3. discourage changes in consumption growth, which helps explain co-movement of investment.

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School of Economics seminars are the main academic seminar series held on a Friday. These seminars are presented by guest researchers and enable School of Economics academics to network with other academics from around Australia and internationally.


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