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Deconstructing Lifecycle Expenditures (2009)
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BibTeX
@MISC{Aguiar09deconstructinglifecycle,
author = {Mark Aguiar and Erik Hurst and Daron Acemoglu and Orazio Attanasio and Richard Blundell and Eric French and Fatih Guevenen and Emi Nakamura and Fabrizio Perri and Ivan Werning},
title = {Deconstructing Lifecycle Expenditures},
year = {2009}
}
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Abstract
In this paper we revisit two well-known facts regarding lifecycle expenditures. The first is the familiar “hump ” shaped lifecycle profile of nondurable expenditures. The second is that cross-household consumption inequality increases steadily throughout the life cycle. We document that the behavior of total nondurables masks surprising heterogeneity in the lifecycle profile of individual consumption sub-components. We find that three categories (food, nondurable transportation, and clothing) account for both the entire decline in mean expenditure post-middle age and a substantial amount of the increase in cross sectional dispersion over the life cycle. All other nondurable categories we study show no decline in mean expenditure over the life cycle nor do they show an increase in cross sectional dispersion over the life cycle. We provide evidence that the categories driving life cycle consumption are either inputs into market work (clothing and transportation) or are amenable to home production (food). Changes in the opportunity cost of time will cause movements in expenditures on such goods even if there is no change to lifetime resources. We then discuss how the patterns documented in the paper
Keyphrases
life cycle lifecycle expenditure lifecycle profile cross sectional dispersion nondurable category lifetime resource nondurable expenditure substantial amount mean expenditure post-middle age entire decline market work total nondurables mask surprising heterogeneity familiar hump opportunity cost life cycle consumption individual consumption sub-components mean expenditure nondurable transportation cross-household consumption inequality well-known fact
