Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Mar, 1974, Volume 42, Issue 2

Optimal Consumption with a Stochastic Income Stream<253:OCWASI>2.0.CO;2-0
p. 253-266

Bruce L. Miller

An infinite horizon consumption model is considered where the labor part of income is random. An upper bound on optimal consumption is obtained by considering the expected value of the optimal return function in the deterministic labor income case. This upper bound on consumption is easily shown to be lower than the value of optimal consumption in the case where the random labor income is replaced by its mean.

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