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Life-Cycle Consumption: Can Single Agent Models Get it Right?

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  • Alexander Bick

    (Goethe University Frankfurt)

Abstract

In the quantitative macro literature, single agent models are heavily used to explain "adult equivalent" household data, a common example being household consumption deflated by some form of equivalence scale. In this paper, we study differences between the consumption of single agent models and the "adult equivalent" household consumption from a model where household size is taken into account. Using a theoretical model we prove that, under mild conditions, these predictions are different. Through a quantitative exercise, we then document that these differences can be substantial with a large variation over the life-cycle.

Suggested Citation

  • Alexander Bick, 2011. "Life-Cycle Consumption: Can Single Agent Models Get it Right?," 2011 Meeting Papers 940, Society for Economic Dynamics.
    • Handle: RePEc:red:sed011:940
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    References listed on IDEAS

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