Consumption over the Life Cycle: How Different is Housing?

Posted: 25 Mar 2009

See all articles by Fang Yang

Fang Yang

Louisiana State University, Baton Rouge

Date Written: March 24, 2009

Abstract

Micro data over the life cycle show different patterns for consumption for 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 hold true at each consumption quartile. This paper develops a quantitative, dynamic, general equilibrium model of life-cycle behavior, that generates consumption profiles consistent with the observed data. Borrowing constraints are essential in explaining the accumulation of housing stock early in life, while transaction costs are crucial in generating the slow downsizing of the housing stock later in life.

Keywords: Consumption, Housing, Life cycle, Distribution

JEL Classification: E21, J14, R21

Suggested Citation

Yang, Fang, Consumption over the Life Cycle: How Different is Housing? (March 24, 2009). Available at SSRN: https://ssrn.com/abstract=1367707

Fang Yang (Contact Author)

Louisiana State University, Baton Rouge ( email )

Baton Rouge, LA 70803
United States

HOME PAGE: http://faculty.bus.lsu.edu/fyang/

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