The Limits of Choice

Saving Decisions and Basic Needs in Developed Countries

Sahra Wagenknecht

The Limits of Choice

Sahra Wagenknecht

Distributed for Campus Verlag

328 pages | 80 line drawings | 5 1/2 x 8 3/8 | © 2013
Paper $54.00 ISBN: 9783593399164 Published October 2013
In The Limits of Choice, Sahra Wagenknecht examines household saving decisions and basic needs in Germany and the United States, based on official data from both countries from the 1950s to present day. Arguing against the hypothesis that assumes consumers optimize their consumption intertemporally based exclusively on their permanent or lifetime income, Wagenknecht proposes a rule of thumb, according to which consumers will save if their current income exceeds basic expenditure, while they will demand credit when income can no longer meet basic needs.  

Lists of Figures

Lists of Variables and Abbreviations


1. Stylised Facts of Saving

                 1.1 Data Sets and Statistical Issues

                1.2 The Historic Path of Saving

                1.3 Stylised Facts at the Macroeconomic Level

                1.4 Stylised Facts at the Microeconomic Level

                1.5 Summary: Stylised Facts of Saving

2. Do Standard Models of Saving Match the Facts?

                2.1 The Standard LCPIH

                2.2 The Empirical Failure of the Standard Models

                2.3 Refinements: Allowing for Precautionary Saving, Liquidity Restraints and Habit Formation

                2.4 Do the Elaborated Models Perform Better?

                2.5 The Optimal Consumption Path – General Remarks

3. A New Approach to Saving Behavior

                3.1 Basic Needs and Saving

                3.2 Basic Needs in Standard Models

                3.3 Modeling Saving Decisions by a Simple Rule of Thumb

4. The Patterns of Consumption Shares

                4.1 How to Identify Basic Needs?

                4.2 Consumption Patterns at the Macroeconomic Level

                4.3 Consumption Patterns at the Microeconomic Level

                4.4 Summary: The Historic Path of the Necessity Share

5. Does our Model Match the Facts?

                5.1 Model Predictions and the Stylised Facts of Saving

                5.2 Model Predictions and Empirical Evidence at the Microeconomic Level

                5.3 Model Predictions and Empirical Evidence at the Macroeconomic Level



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