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Household Saving and Full Consumption over the Life Cycle

Author

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  • Apps, Patricia

    () (University of Sydney)

  • Rees, Ray

    () (University of Munich)

Abstract

This paper extends the standard model of life cycle consumption, saving and labor supply in a number of directions. First, it argues that consumption should be defined as expenditure on household production as well as on market goods, that is, we are interested in life cycle profiles of full consumption. If this is done, several well-known puzzles concerning life cycle consumption behaviour are resolved. Secondly, we stress the importance of the heterogeneity of household behaviour in respect of female labour supply and saving, and provide evidence to show that these are very closely related across households. Finally, we formulate theoretical and empirical models incorporating these ideas and use them to show that policy changes, such as a reduction in the progressivity of income taxation, can have effects that contrast sharply with those suggested in the existing literature.

Suggested Citation

  • Apps, Patricia & Rees, Ray, 2001. "Household Saving and Full Consumption over the Life Cycle," IZA Discussion Papers 280, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp280
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    Cited by:

    1. Patricia Apps & Ray Rees, 2005. "Gender, Time Use, and Public Policy over the Life Cycle," Oxford Review of Economic Policy, Oxford University Press, vol. 21(3), pages 439-461, Autumn.
    2. Mauro Mastrogiacomo & Nicole Bosch, 2011. "Tax credits, labour participation and home production in the Netherlands," Applied Economics, Taylor & Francis Journals, vol. 43(23), pages 3115-3128.
    3. Martin Browning & Thomas F. Crossley, 2001. "The Life-Cycle Model of Consumption and Saving," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 3-22, Summer.
    4. Thomas F. Crossley & Yuqian Lu, 2004. "Exploring the Returns to Scale in Food Preparation (Baking Penny Buns at Home)," Social and Economic Dimensions of an Aging Population Research Papers 121, McMaster University.
    5. Felix Freyland, 2005. "Household Composition and Savings: An Overview," MEA discussion paper series 05087, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
    6. Mauro Mastrogiacomo & Rob Alessie, 2011. "Did you really save so little for your retirement? An analysis of retirement savings and unconventional retirement accounts," CPB Discussion Paper 200, CPB Netherlands Bureau for Economic Policy Analysis.
    7. Apps, Patricia & Rees, Ray, 2001. "Household production, full consumption and the costs of children," Labour Economics, Elsevier, vol. 8(6), pages 621-648, December.
    8. Kohns, Stephan, 2001. "Testing for Asymmetry in British, German and US Unemployment Data," IZA Discussion Papers 341, Institute for the Study of Labor (IZA).
    9. Mauro Mastrogiacomo & Nicole Bosch, 2006. "Income incentives to labour participation and home production; the contribution of the tax credits in the Netherlands," CPB Discussion Paper 59, CPB Netherlands Bureau for Economic Policy Analysis.
    10. Apps, Patricia, 2003. "Gender, Time Use and Models of the Household," IZA Discussion Papers 796, Institute for the Study of Labor (IZA).
    11. Adriaan Kalwij, 2005. "Consumption and Income Around the Time of Births," Review of Economics of the Household, Springer, vol. 3(1), pages 75-89, July.
    12. World Bank, 2011. "Turkey - Country Economic Memorandum (CEM) : Sustaining High Growth - The Role of Domestic savings : Synthesis Report," World Bank Other Operational Studies 12264, The World Bank.
    13. Thomas F. Crossley & Yuqian Lu, 2004. "Exploring the Returns-to-Scale in Food Preparation," Department of Economics Working Papers 2004-06, McMaster University.
    14. Tasnim Khan & Abid Rashid Gill & Sobia Haneef, 2013. "Determinants of Private Saving: A Case of Pakistan," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 1(1), pages 1-7, December.

    More about this item

    Keywords

    Saving; household production; full consumption; life cycle;

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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