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Revisiting the Effect of Household Size on Consumption Over the Life-Cycle

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  • Bick, Alexander
  • Choi, Sekyu

Abstract

Although the link between household size and consumption has a strong empirical support, there is no consistent way in which demographics are dealt with in standard life-cycle models. We study the relationship between the predictions of the Single Agent model (the standard in the literature) versus a simple model extension where deterministic changes in household size and composition affect optimal consumption decisions. We provide theoretical results comparing both approaches and quantify the differences in predictions across models.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41756.

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Date of creation: Oct 2012
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Handle: RePEc:pra:mprapa:41756

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Keywords: Consumption; Life-Cycle Models;

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Cited by:
  1. Jurgen Faik & Uwe Fachinger, 2013. "The decomposition of well-being categories: An application to Germany," Working Papers 307, ECINEQ, Society for the Study of Economic Inequality.

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