60 Pages Posted: 11 Nov 2019 Last revised: 5 May 2020
Date Written: May 4, 2020
Priceless consumption (PC) is a type of consumption that is not available in the marketplace and, therefore, is absent from aggregate consumption measures. We propose an estimation methodology to recover PC from its effects on the composition of observable consumption. The estimation shows that PC is economically significant: It is highly volatile and has become increasingly scarce and valuable over the past decades. As an application, we show that using the recovered true aggregate consumption series, which includes PC, significantly improves the fit of the standard consumption-CAPM with power-utility.
Keywords: Consumption, NIPA, Demand System Estimation, Translog, Asset Pricing, C-CAPM
JEL Classification: E01, E21, G12, D12
Suggested Citation: Suggested Citation