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CNB > Economic research > Research publications > CNB Working paper series > 2014 > Cross-Country Heterogeneity in Intertemporal Substitution

Cross-Country Heterogeneity in Intertemporal Substitution

Tomáš Havránek, Roman Horváth, Zuzana Iršová, Marek Rusnák

We collect 2,735 estimates of the elasticity of intertemporal substitution in consumption from 169 published studies that cover 104 countries during different time periods. The estimates vary substantially from country to country, even after controlling for 30 aspects of study design. Our results suggest that income and asset market participation are the most effective factors in explaining the heterogeneity: households in rich countries and countries with high stock market participation substitute a larger fraction of consumption intertemporally in response to changes in expected asset returns. Micro-level studies that focus on sub-samples of rich households or asset holders also find systematically larger values of the elasticity.

JEL codes: C83, D91, E21

Keywords: Bayesian model averaging, consumption, elasticity of intertemporal substitution, meta-analysis

Issued: August 2014

Download: CNB WP 6/2014 (pdf, 1.3 MB)

Published as: Havránek, T., Horváth, R., Iršová, Z., Rusnák, M. (2015): Cross-Country Heterogeneity in Intertemporal Substitution. Journal of International Economics, 96, pp. 100–118.