Patterns of Spending Behavior and the Relative Position in the Income Distribution: Some Empirical Evidence

Abstract

A model integrating the permanent income and relative income hypotheses was employed to explain consumer expenditure behavior in the U.S. The model was empirically tested using data from the interview survey portion of the 1996 and 1997 Consumer Expenditure Survey. The results indicate that household expenditure behavior is generally explained by both hypotheses when integrated in one model.