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Deconstructing Life Cycle Expenditure

Listed author(s):
  • Mark Aguiar
  • Erik Hurst

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://dx.doi.org/10.1086/670740
Download Restriction: Access to the online full text or PDF requires a subscription.

File URL: http://dx.doi.org/10.1086/670740
Download Restriction: Access to the online full text or PDF requires a subscription.

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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
Contact details of provider: Web page: http://www.journals.uchicago.edu/JPE/

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