Test of Permanent Income Hypothesis on Czech Voucher Privatization

Abstract

This paper tests the permanent income hypothesis using the natural experiment of Czech voucher privatization. This form of privatization moved state assets to individuals and represented an unexpected windfall gain for participants of the privatization scheme. Whether the windfall was consumed or saved provides a clear test of the permanent income hypothesis. Analysis based on data from a sample survey suggests that only a small number of transferred assets were cashed in and spent on consumption. This result supports the concept of the permanent income hypothesis.