Testing the cross-section implications of Friedmanʹs permanent income hypothesis

We use modern household data and econometric methods to conduct some of the original tests of the permanent income hypothesis (PIH) suggested and used by Friedman [1957. A Theory of the Consumption Function. Princeton University Press, Princeton]. The data and methods are superior to those available to Friedman, allowing us to refine Friedmanʹs tests and perform tests he could not do. The results provide overall though not universal support for PIH.