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Deconstructing Life Cycle Expenditure

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  • Mark Aguiar
  • Erik Hurst
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    Abstract

    We revisit two well-known facts regarding life cycle expenditures: the “hump”-shaped profile of nondurable expenditures and the increase in cross-household consumption inequality. We document that the behavior of total nondurables masks surprising heterogeneity in the life cycle profile of individual consumption subcomponents. We provide evidence that the categories driving life cycle consumption either are inputs into market work or are amenable to home production. Using a quantitative model, we document that the disaggregated life cycle consumption profiles imply a level of uninsurable permanent income risk that is substantially lower than that implied by a model using a composite consumption good.

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    File URL: http://www.jstor.org/stable/pdfplus/10.1086/670740
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    File URL: http://www.jstor.org/stable/full/10.1086/670740
    Download Restriction: Access to the online full text or PDF requires a subscription.

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    Bibliographic Info

    Article provided by University of Chicago Press in its journal Journal of Political Economy.

    Volume (Year): 121 (2013)
    Issue (Month): 3 ()
    Pages: 437 - 492

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    Handle: RePEc:ucp:jpolec:doi:10.1086/670740

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    Web page: http://www.journals.uchicago.edu/JPE/

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    Cited by:
    1. David Lagakos & Benjamin Moll & Tommaso Porzio & Nancy Qian, 2012. "Experience Matters: Human Capital and Development Accounting," NBER Working Papers 18602, National Bureau of Economic Research, Inc.
    2. Nicolas Moreau & Elena Stancanelli, 2013. "Household Consumption at Retirement: A Regression Discontinuity Study on French," Documents de travail du Centre d'Economie de la Sorbonne 13072, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    3. Nicolas Moreau & Elena Stancanelli, 2013. "Household Consumption at Retirement: A Regression Discontinuity Study on French Data," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00881215, HAL.
    4. Coeurdacier, Nicolas & Guibaud, Stéphane & Jin, Keyu, 2012. "Credit Constraints and Growth in a Global Economy," CEPR Discussion Papers 9109, C.E.P.R. Discussion Papers.

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