“Deconstructing Life Cycle Expenditure”

PDF – Journal link – Online appendix – Data

Citation

Aguiar, Mark and Erik Hurst (2013): “Deconstructing Life Cycle Expenditure,” Journal of Political Economy, 121(3): 437-492.

Abstract

In this paper we revisit two well-known facts regarding lifecycle expenditures. The first is the familiar “hump” shaped lifecycle profile of nondurable expenditures. The second is that cross-household consumption inequality increases steadily throughout the lifecycle. We document that the behavior of total nondurables masks surprising heterogeneity in the lifecycle profile of individual consumption sub-components. We provide evidence that the categories driving lifecycle consumption are either inputs into market work (clothing and transportation) or are amenable to home production (food). Using a quantitative model, we document that the disaggregated lifecycle consumption profiles imply a level of uninsurable permanent income risk that is similar to that implied by wage data and substantially lower than that implied by a model using only a composite consumption good.

BibTeX Cite:

@article {AguiarHurst2013,
	title = {Deconstructing Life Cycle Expenditure},
	journal = {Journal of Political Economy},
	volume = {121},
	number = {3},
	year = {2013},
	pages = {437-492},
	abstract = {In this paper we revisit two well-known facts regarding lifecycle expenditures. The first is the familiar "hump" shaped lifecycle profile of nondurable expenditures. The second is that cross-household consumption inequality increases steadily throughout the lifecycle. We document that the behavior of total nondurables masks surprising heterogeneity in the lifecycle profile of individual consumption sub-components. We provide evidence that the categories driving lifecycle consumption are either inputs into market work (clothing and transportation) or are amenable to home production (food).   Using a quantitative model, we document that the disaggregated lifecycle consumption profiles imply a level of uninsurable permanent income risk that is similar to that implied by wage data and substantially lower than that implied by a model using only a composite consumption good.},
	author = {Aguiar, Mark and Hurst, Erik},
	url={https://doi.org/10.1086/670740}
	}