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Consumption over the Life Cycle: Facts from Consumer Expenditure Survey Data

  • Jesus Fernández-Villaverde

    (University of Pennsylvania)

  • Dirk Krueger

    (University of Frankfurt, CEPR, and NBER)

This paper uses Consumer Expenditure Survey data and a seminonparametric statistical model to estimate life cycle profiles of consumption, controlling for demographics, cohort, and time effects. We construct age profiles for total and nondurable consumption as well as expenditure patterns for consumer durables. Special emphasis is placed on the comparison of different approaches to control for changes in demographics over the life cycle. We find significant humps over the life cycle for total, nondurable, and durable expenditures. Changes in household size account for roughly half of these humps. Bootstrap simulations suggest that our empirical estimates are tight in that standard errors are small. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 89 (2007)
Issue (Month): 3 (August)
Pages: 552-565

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Handle: RePEc:tpr:restat:v:89:y:2007:i:3:p:552-565
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