Abstract
In a recent issue of this Journal, Mace (1991) presented empirical evidence in support of the hypothesis that U.S. households engage in full risk sharing. The data used were taken from the U.S. Consumer Expenditure Survey (CEX) for the years 1980-84. Full insurance implies that household-level consumption should be perfectly correlated with aggregate consumption but uncorrelated with householdlevel changes in income. Mace's surprising result was that, at least for one functional specification, household-level income changes, whether measured directly by changes in reported income or proxied by employment change dummies, seemed to have no statistically significant effect on consumption. This comment demonstrates that this result was due to measurement error in key variables.
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