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Author: Pierre-Olivier Gourinchas
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 62
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Book Description
This paper employs a synthetic cohort technique and Consumer Expenditure Survey data to construct average age-profiles of consumption and income over the working lives of typical households across different education and occupation groups. Using these profiles, we estimate a structural model of optimal life-cycle consumption expenditures in the presence of realistic labor income uncertainty. The model fits the profiles quite well. In addition to providing tight estimates of the discount rate and risk aversion, we find that consumer behavior changes strikingly over the life-cycle. Young consumers behave as buffer-stock agents. Around age 40, the typical household starts accumulating liquid assets for retirement, and its behavior mimics more closely that of a certainty equivalent consumer. This change in behavior is mostly driven by the life-cycle profile of expected income. Our methodology provides a natural decomposition of saving into its precautionary and retirement components.
Author: Pierre-Olivier Gourinchas
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 62
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Book Description
This paper employs a synthetic cohort technique and Consumer Expenditure Survey data to construct average age-profiles of consumption and income over the working lives of typical households across different education and occupation groups. Using these profiles, we estimate a structural model of optimal life-cycle consumption expenditures in the presence of realistic labor income uncertainty. The model fits the profiles quite well. In addition to providing tight estimates of the discount rate and risk aversion, we find that consumer behavior changes strikingly over the life-cycle. Young consumers behave as buffer-stock agents. Around age 40, the typical household starts accumulating liquid assets for retirement, and its behavior mimics more closely that of a certainty equivalent consumer. This change in behavior is mostly driven by the life-cycle profile of expected income. Our methodology provides a natural decomposition of saving into its precautionary and retirement components.
Author: Gilbert R. Ghez
Publisher: Columbia University Press
ISBN:
Category : Business & Economics
Languages : en
Pages : 180
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Book Description
There is a belief now that family behavior over the life cycle can be analyzed by economic methods. This study deals with allocation of resources by families over time.
Author: Orazio P. Attanasio
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 54
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Book Description
The main aim of this paper is to assess the validity of the life cycle model of consumption. In particular, we address an issue that has recently received much attention, especially in the macroeconomic literature: that of "excess sensitivity" of consumption growth to income growth. We do this using a time series of cross sections and a novel and flexible parameterization of preferences. The former allows us to' address aggregation issues directly, while with the latter we can allow both the discount factor and the elasticity of intertemporal substitution eis to be affected by various observable variables and lifetime wealth. The main findings can be summarized as follows: (i) the excess sensitivity of consumption growth to labor income disappears when we control for demographic variables. This is true both at life cycle and business cycle frequencies. (ii) estimation of a flexible specification of preferences indicates that the elasticity of intertemporal substitution is a function of several variables, including the level of consumption. The eis increases with the level of consumption, as expected. (iii) the variables that change the eis are also important in explaining why we observe excess sensitivity over the business cycle. (iv) we are able to reconcile our results with those reported both in the macro and micro literature. (v) in our specification the elasticity of intertemporal substitution is not very well determined. This result, however, should be taken with care, as we have not made an effort to construct a 'preferred' specification, which would probably include additional controls for labor supply behavior. The evidence presented shows that the life cycle model cannot be easily dismissed. Indeed, we believe that the model does a good job at representing consumption behavior both over the life cycle and over the business cycle.
Author: Jesús Fernández-Villaverde
Publisher:
ISBN:
Category : Consumer behavior
Languages : en
Pages : 30
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Book Description
This paper uses a seminonparametric model and Consumer Expenditure Survey data to estimate life cycle profiles of consumption, controlling for demographics, cohort and time e.ects. In addition to documenting profiles for total and nondurable consumption, we devote special attention to the age expenditure pattern for consumer durables. We find hump-shaped paths over the life cycle for total, for nondurable and for durable expenditures. Changes in household size account for roughly half of these humps. The other half remains unaccounted for by the standard complete markets life cycle model. Our results imply that households do not smooth consumption over their lifetimes. This is especially true for services from consumer durables. Bootstrap simulations suggest that our empirical estimates are tight and sensitivity analysis indicates that the computed profiles are robust to a large number of different specifications
Author: John B. Shoven
Publisher: University of Chicago Press
ISBN: 0226044351
Category : Business & Economics
Languages : en
Pages : 396
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Book Description
The past decade has witnessed a decline in saving throughout the developed world—the United States has the dubious distinction of leading the way. The consequences can be serious. For individuals, their own economic security and that of their families is jeopardized. For society, inadequate rates of saving have been blamed for a variety of ills—decreasing the competitive abilities of American industry, slowing capital accumulation, increasing our trade deficit, and forcing the sale of capital stock to foreign investors at bargain prices. Restoring acceptable rates of saving in the United States poses a major challenge to those who formulate national economic policy, especially since economists and policymakers alike still understand little about what motivates people to save. In National Saving and Economic Performance, edited by B. Douglas Bernheim and John B. Shoven, that task is addressed by offering the results of new research, with recommendations for policies aimed to improve saving. Leading experts in diverse fields of economics debate the need for more accurate measurement of official saving data; examine how corporate decisions to retain or distribute earnings affect household-level consumption and saving; and investigate the effects of taxation on saving behavior, correlations between national saving and international investment over time, and the influence of economic growth on saving. Presenting the most comprehensive and up-to-date research on saving, this volume will benefit both academic and government economists.
Author: Pablo Fernandez
Publisher:
ISBN:
Category :
Languages : en
Pages : 260
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Book Description
Author: Martin Gervais
Publisher: London : Department of Economics, University of Western Ontario
ISBN: 9780771421037
Category :
Languages : en
Pages : 39
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Book Description
Author: Gary D. Hansen
Publisher:
ISBN:
Category : Consumption (Economics)
Languages : en
Pages : 32
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Book Description
"We explore the quantitative implications of uncertainty about the length of life and a lack of annuity markets for life cycle consumption in a general equilibrium overlapping generations model in which markets are otherwise complete. Empirical studies find that consumption tends to rise early in life, peak around age 45-55, and to decline after that. Our calibrated model exhibits life cycle consumption that is consistent with this pattern. This follows from the fact that, due to a lack of annuity markets, households discount the future more heavily as they age and their probability of survival falls. Once an unfunded social security system is introduced, the profile is still hump shaped, but the decline in consumption does not begin until after retirement in our base case. Adding a bequest motive causes this decline to begin at a younger age"--National Bureau of Economic Research web site.
Author: Patricia F. Apps
Publisher:
ISBN:
Category :
Languages : en
Pages : 48
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Book Description
This paper extends the standard model of life cycle consumption, saving and labor supply in a number of directions. First, it argues that consumption should be defined as expenditure on household production as well as on market goods, that is, we are interested in life cycle profiles of full consumption. If this is done, several well-known puzzles concerning life cycle consumption behaviour are resolved. Secondly, we stress the importance of the heterogeneity of household behaviour in respect of female labour supply and saving, and provide evidence to show that these are very closely related across households. Finally, we formulate theoretical and empirical models incorporating these ideas and use them to show that policy changes, such as a reduction in the progressivity of income taxation, can have effects that contrast sharply with those suggested in the existing literature.
Author: Kjetil Storesletten
Publisher:
ISBN:
Category : Aging
Languages : en
Pages : 44
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Book Description
A striking feature of U.S. data on income and consumption is that inequality increases with age. Using both panel data and an equilibrium life cycle model, we argue that this is informative for understanding the importance and the characteristics of idiosyncratic labor market risk. We find that uncertainty distributed throughout the working years accounts for 40 percent of life time uncertainty, with the remainder being realized prior to entering the labor market. We estimate that the shocks received over the life cycle contain a highly persistent component, with an autocorrelation coefficient between 0.98 and unity. The joint behavior of earnings and consumption inequality, interpreted using our model, adds to the body of evidence suggesting that labor market risks are imperfectly pooled and that a precautionary motive is an important aspect of U.S. savings behavior. The restrictions imposed by general equilibrium theory play an important role in arriving at each of these conclusions
