Revisiting the effect of household size on consumption over the life-cycle
Choi, Sekyu (Universitat Autònoma de Barcelona)
Bick, Alexander (Arizona State University)

Data:	2013
Resum:	Although the link between household size and consumption has strong empirical support, there is no consistent way in which demographics are dealt with in standard life-cycle models. We study the relationship between the predictions of the Single Agent model (the standard in the literature) versus a simple model extension (the Demographics model) where deterministic changes in household size and composition affect optimal consumption decisions. We show theoretically that the Demographics model is conceptually preferable to the Single Agent model as it captures economic mechanisms ignored by the latter. However, our quantitative analysis demonstrates that differences in predictions for consumption are negligible across models, when using standard calibration strategies. This suggests that it is largely irrelevant which model specification is used.
Ajuts:	Ministerio de Economía y Competitividad ECO2012-32392 Ministerio de Ciencia e Innovación SEV-2011-0075
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Llengua:	Anglès
Document:	Article ; recerca ; Versió acceptada per publicar
Matèria:	Consumption ; Life-Cycle Models
Publicat a:	Journal of economic dynamics & control, Vol. 37 Núm. 12 (December 2013) , p. 2998-3011, ISSN 0165-1889

DOI: 10.1016/j.jedc.2013.08.006

31 p, 431.6 KB

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