Revisiting the Effect of Household Size on Consumption Over the Life-Cycle
Arizona State University (ASU) - Economics Department
Autonomous University of Barcelona - Department of Economics
October 5, 2012
Although the link between household size and consumption has a 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 where deterministic changes in household size and composition affect optimal consumption decisions. We provide theoretical results comparing both approaches and quantify the differences in predictions across models.
Number of Pages in PDF File: 39
Keywords: Consumption, Life-Cycle Models, Households
JEL Classification: D12, D91, E21, J10working papers series
Date posted: March 16, 2011 ; Last revised: October 6, 2012
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