Knowra Franco Modigliani Franco Modigliani Franco Modigliani (1918–2003) was an Italian-American economist who developed the life-cycle hypothesis of saving and shared the 1985 Nobel Memorial Prize in Economic Sciences.
Life-cycle hypothesis : An economic theory that people plan consumption and saving over their lifetimes, borrowing when young and drawing down wealth in retirement. Modigliani developed this account of how expected lifetime resources shape household saving.
Life-cycle saving : Saving and dissaving across a person’s lifetime in response to changing income and expected future needs. This is the household behavior Modigliani’s hypothesis was designed to explain.
Merton Miller : An American economist who shared the 1990 Nobel Memorial Prize in Economic Sciences for work on corporate finance. Miller collaborated with Modigliani on the theorem that bears both economists’ names.
Rome : The capital city of Italy, situated in the Lazio region. Modigliani was born in Rome in 1918.
Corporate finance : The field concerned with how companies raise, invest, and distribute financial resources. Modigliani’s theorem became a foundation for modern analysis of financing decisions.
Permanent income hypothesis : Milton Friedman’s theory that consumption responds chiefly to expected long-run income rather than temporary income changes. It offers a parallel explanation of consumption smoothing, associated with Modigliani’s contemporary Milton Friedman.
Pension economics : The study of retirement income systems, pension design, and their effects on households and economies. The life-cycle view connects retirement income arrangements to saving decisions made earlier in life.
Milton Friedman : An American economist whose work on consumption, monetary policy, and inflation shaped twentieth-century economics. Friedman’s permanent-income hypothesis parallels Modigliani’s account while emphasizing expected long-run income.
University of Rome : A public research university in Rome, founded in 1303 and commonly known as Sapienza University of Rome. He studied law there before leaving Italy for the United States.
Life-cycle hypothesis of saving : A theory that households distribute consumption across their lives by saving during higher-income years and using wealth later. This named formulation captures the hypothesis most closely associated with Modigliani.
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