The Life Cycle Income and expenditure Patterns of Iranian Households

The estimation of Income and Consumption Patterns can be considered as a suitable tool for informing policy makers. Since Iranian households have experienced extensive changes in their socio-economic structure in the past few decades, it is not correct to generalize the pattern of income and expenditure distribution of developed countries to Iranian households. Based on this, the present study tries to estimate the life cycle profiles of income and expenditure in Iran (1380-1399), using pseudo-panel data and the two-stage Speakman method. Based on the results, the age profiles show a hump-shaped pattern. Since expenditure smoothing behavior distributes certain sources of inequality equally over the life cycle, it has a flatter age profile than income. More educated households with higher income and expenditure levels have a higher income growth rate and for a longer period of time. The slow increase in the inequality of consumption compared to income shows that most of the permanent changes in income have been predictable for individuals. Also, according to the hypothesis of permanent income and the findings of other economies, expenditure inequality has increased for households over 30 years old. This result is consistent with life cycle models of imperfect markets in which permanent shocks are small or zero for all early in the life cycle, and increase over time due to the accumulation of shocks. Finally, the estimation of the income process showed that although the permanent income shocks are the same for all households, in the group without academic education, the past income has a greater effect on the current income, and this group suffers larger temporary income shocks.