Consumption Along the Life Cycle: How Different is Housing?

Federal Reserve Bank of Minneapolis Working Paper No. 635

53 Pages Posted: 27 Apr 2006

See all articles by Fang Yang

Fang Yang

Federal Reserve Banks - Federal Reserve Bank of Dallas

Date Written: November 2005

Abstract

Micro data over the life cycle shows two different patterns of consumption of housing and non-housing goods: the consumption profile of non-housing goods is hump-shaped while the consumption profile for housing first increases monotonically and then flattens out. These patterns also hold true at each quartile. This paper develops a quantitative, dynamic general equilibrium model of life cycle behavior, which generates consumption profiles consistent with the observed data. Borrowing constraints are essential in explaining the accumulation of housing assets early in life, while transaction costs are crucial in generating the slow downsizing of the housing assets later in life. The bequest motives play a role in determining total life time wealth, but not the housing profile.

Suggested Citation

Yang, Fang, Consumption Along the Life Cycle: How Different is Housing? (November 2005). Federal Reserve Bank of Minneapolis Working Paper No. 635, Available at SSRN: https://ssrn.com/abstract=897802 or http://dx.doi.org/10.2139/ssrn.897802

Fang Yang (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

HOME PAGE: http://https://sites.google.com/view/fangyang/home?authuser=0

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
37
Abstract Views
438
PlumX Metrics