Consumption and Home Production over the Life Cycle
In this paper, we document households' time use and consumption over the life cycle. Specifically, households spend a roughly constant amount of hours doing market work and home production early in the life cycle. At age 50, they begin to reduce their market hours sharply and increase home hours. Households' expenditure on goods bought from the market for consumption, goods bought for home production, and housing services all exhibit hump shapes as they age, with the market good having the most pronounced hump, followed by the home good, and then housing services. We then incorporate home production in a dynamic stochastic general equilibrium model of consumption and savings with illiquid housing and collateralized borrowing constraint. We show that a plausibly parameterized version of the model explains the observed patterns. In particular, the model predicts that the interaction of the labor efficiency profile and home production explains largely households' time use over the life cycle. The resulting income profiles as well as the endogenous borrowing constraint account for the initial humps in all three consumption goods. The consumption profiles in the second half of the life cycle are mostly driven by the complementarity of home hours, home good, and housing in home production.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mark Aguiar & Erik Hurst, 2008.
"Deconstructing Lifecycle Expenditure,"
wp173, University of Michigan, Michigan Retirement Research Center.
- Smith, Lawrence B & Rosen, Kenneth T & Fallis, George, 1988. "Recent Developments in Economic Models of Housing Markets," Journal of Economic Literature, American Economic Association, vol. 26(1), pages 29-64, March.
- Rupert, Peter & Rogerson, Richard & Wright, Randall, 2000. "Homework in labor economics: Household production and intertemporal substitution," Journal of Monetary Economics, Elsevier, vol. 46(3), pages 557-579, December.
- Jess Benhabib & Richard Rogerson & Randall Wright, 1991.
"Homework in macroeconomics: household production and aggregate fluctuations,"
135, Federal Reserve Bank of Minneapolis.
- Benhabib, Jess & Rogerson, Richard & Wright, Randall, 1991. "Homework in Macroeconomics: Household Production and Aggregate Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1166-87, December.
- Martin Gervais, 1998.
"Housing Taxation and Capital Accumulation,"
UWO Department of Economics Working Papers
9807, University of Western Ontario, Department of Economics.
- Bullard, James & Feigenbaum, James, 2007.
"A leisurely reading of the life-cycle consumption data,"
Journal of Monetary Economics,
Elsevier, vol. 54(8), pages 2305-2320, November.
- James Bullard & James Feigenbaum, 2006. "A leisurely reading of the life-cycle consumption data," Working Papers 2003-017, Federal Reserve Bank of St. Louis.
- Mark Bils & Yongsung Chang & Sun-Bin Kim, 2009.
"Comparative Advantage and Unemployment,"
NBER Working Papers
15030, National Bureau of Economic Research, Inc.
- Martin Browning & Mette Ejrnæs, 2002.
"Consumption and Children,"
CAM Working Papers
2002-06, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
- Mariacristina De Nardi & Eric French & John Bailey Jones, 2005.
"Differential mortality, uncertain medical expenses, and the saving of elderly singles,"
Working Paper Series
WP-05-13, Federal Reserve Bank of Chicago.
- Mariacristina De Nardi & Eric French & John Bailey Jones, 2006. "Differential Mortality, Uncertain Medical Expenses, and the Saving of Elderly Singles," 2006 Meeting Papers 46, Society for Economic Dynamics.
- Mariacristina De Nardi & Eric French & John Bailey Jones, 2006. "Differential Mortality, Uncertain Medical Expenses, and the Saving of Elderly Singles," NBER Working Papers 12554, National Bureau of Economic Research, Inc.
- Fang Yang, 2009.
"Consumption over the Life Cycle: How Different is Housing?,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 12(3), pages 423-443, July.
- Fang Yang, 2008. "Code and data files for "Consumption over the Life Cycle: How Different is Housing?"," Computer Codes 06-210, Review of Economic Dynamics.
- Paul Gomme & Finn E. Kydland & Peter Rupert, 2001.
"Home Production Meets Time to Build,"
Journal of Political Economy,
University of Chicago Press, vol. 109(5), pages 1115-1131, October.
- Valerie A. Ramey, 2008. "Time Spent in Home Production in the 20th Century: New Estimates from Old Data," NBER Working Papers 13985, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:red:sed010:423. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.