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Life-Cycle Prices and Production

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Author Info

  • Mark Aguiar
  • Erik Hurst

Abstract

We use scanner data and time diaries to document how households substitute time for money through shopping and home production. We document substantial heterogeneity in prices paid for identical goods for the same area and time, with older households shopping the most and paying the lowest prices. Doubling shopping frequency lowers a good's price by 7 to 10 percent. We estimate the shopper's price of time and use this series to estimate an elasticity of substitution between time and goods in home production of roughly 1.8. The observed life-cycle time allocation implies a consumption series that differs markedly from expenditures. (JEL D12, D91)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.97.5.1533
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 97 (2007)
Issue (Month): 5 (December)
Pages: 1533-1559

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Handle: RePEc:aea:aecrev:v:97:y:2007:i:5:p:1533-1559

Note: DOI: 10.1257/aer.97.5.1533
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  1. Gourinchas, P.O. & Parker, J.A., 1997. "Consumption Over the Life Cycle," Working papers 9722, Wisconsin Madison - Social Systems.
  2. Orazio P. Attanasio & James Banks & Costas Meghir & Guglielmo Weber, 1995. "Humps and Bumps in Lifetime Consumption," NBER Working Papers 5350, National Bureau of Economic Research, Inc.
  3. Jeremy Greenwood & Ananth Seshadri & Guillaume Vandenbroucke, 2002. "The Baby Boom and Baby Bust," Economie d'Avant Garde Research Reports 1, Economie d'Avant Garde.
  4. Ron Cronovich & Rennae Daneshvary & R. Keith Schwer, 1997. "The determinants of coupon usage," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1631-1641.
  5. Urban J. Jermann & Marianne Baxter, 1999. "Household Production and the Excess Sensitivity of Consumption to Current Income," American Economic Review, American Economic Association, vol. 89(4), pages 902-920, September.
  6. Rupert, Peter & Rogerson, Richard & Wright, Randall, 2000. "Homework in labor economics: Household production and intertemporal substitution," Journal of Monetary Economics, Elsevier, vol. 46(3), pages 557-579, December.
  7. Kaufman, Phillip R. & MacDonald, James M. & Lutz, Steve M. & Smallwood, David M., 1997. "Do the Poor Pay More for Food? Item Selection and Price Differences Affect Low-Income Household Food Costs," Agricultural Economics Reports 34065, United States Department of Agriculture, Economic Research Service.
  8. Peter Rupert & Richard Rogerson & Randall Wright, 1994. "Estimating substitution elasticities in household production models," Staff Report 186, Federal Reserve Bank of Minneapolis.
  9. Jerry Hausman & Ephraim Leibtag, 2009. "CPI Bias from Supercenters: Does the BLS Know that Wal-Mart Exists?," NBER Chapters, in: Price Index Concepts and Measurement, pages 203-231 National Bureau of Economic Research, Inc.
  10. Martin Browning & Annamaria Lusardi, 1995. "Household Saving: Micro Theories and Micro Facts," Department of Economics Working Papers 1995-02, McMaster University.
  11. Alan T. Sorensen, 2000. "Equilibrium Price Dispersion in Retail Markets for Prescription Drugs," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 833-862, August.
  12. Gilbert Ghez & Gary S. Becker, 1975. "The Allocation of Time and Goods over the Life Cycle," NBER Books, National Bureau of Economic Research, Inc, number ghez75-1.
  13. Jess Benhabib & Richard Rogerson & Randall Wright, 1991. "Homework in macroeconomics: household production and aggregate fluctuations," Staff Report 135, Federal Reserve Bank of Minneapolis.
  14. Yongsung Chang & Frank Schorfheide, 2003. "Labor shifts and economic fluctuations," Working Paper 03-07, Federal Reserve Bank of Richmond.
  15. Banks, James & Johnson, Paul, 1994. "Equivalence Scale Relativities Revisited," Economic Journal, Royal Economic Society, vol. 104(425), pages 883-90, July.
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  1. "The Consumption Response to Income Changes"
    by Mark Thoma in Economist's View on 2010-04-02 07:06:00
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