Life cycle hypothesis

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The Life Cycle Hypothesis (LCH) is an economic concept analysing individual consumption patterns. It was developed by the economists Irving Fisher, Roy Harrod, Alberto Ando and Franco Modigliani.

Unlike the Keynesian consumption function, which assumes consumption is entirely based on current income, LCH assumes that individuals consume a constant percentage of the present value of their life income.

[edit] Literature

  • Robert E. Hall, 1979. Stochastic Implications of the Life Cycle-Permanent Income Hypothesis: Theory and Evidence, NBER

[edit] See also

Permanent income hypothesis


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