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Lyfe-cycle effects on household expenditures: A latent-variable approach

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Abstract

Using data from the Spanish household budget survey, we investigate life- cycle effects on several product expenditures. A latent-variable model approach is adopted to evaluate the impact of income on expenditures, controlling for the number of members in the family. Two latent factors underlying repeated measures of monetary and non-monetary income are used as explanatory variables in the expenditure regression equations, thus avoiding possible bias associated to the measurement error in income. The proposed methodology also takes care of the case in which product expenditures exhibit a pattern of infrequent purchases. Multiple-group analysis is used to assess the variation of key parameters of the model across various household life-cycle typologies. The analysis discloses significant life-cycle effects on the mean levels of expenditures; it also detects significant life-cycle effects on the way expenditures are affected by income and family size. Asymptotic robust methods are used to account for possible non-normality of the data.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 354.

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Date of creation: Oct 1998
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Handle: RePEc:upf:upfgen:354

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Web page: http://www.econ.upf.edu/

Related research

Keywords: Structural equations; multi-group analysis; life cycle effects; product expenditures;

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  1. Jørgen Aasness & Erik Biørn & Terje Skjerpen, 1995. "Distribution of Preferences and Measurement Errors in a Disaggregated Expenditure System+," Discussion Papers 149, Research Department of Statistics Norway.
  2. Albert Satorra, 1991. "Asymptotic robust inferences in the analysis of mean and covariance structures," Economics Working Papers 3, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Punj, Girish N & Staelin, Richard, 1983. " A Model of Consumer Information Search Behavior for New Automobiles," Journal of Consumer Research, University of Chicago Press, vol. 9(4), pages 366-80, March.
  4. Aasness, Jorgen & Biorn, Erik & Skjerpen, Terje, 1993. "Engel Functions, Panel Data, and Latent Variables," Econometrica, Econometric Society, vol. 61(6), pages 1395-1422, November.
  5. Satorra, Albert & Neudecker, Heinz, 1994. "On the Asymptotic Optimality of Alternative Minimum-Distance Estimators in Linear Latent-Variable Models," Econometric Theory, Cambridge University Press, vol. 10(05), pages 867-883, December.
  6. Robert Summers, 1957. "A Note on Least Squares Bias in Household Expenditure Analysis," Cowles Foundation Discussion Papers 29, Cowles Foundation for Research in Economics, Yale University.
  7. Biorn, Erik, 1992. "The Bias of Some Estimators for Panel Data Models with Measurement Errors," Empirical Economics, Springer, vol. 17(1), pages 51-66.
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