Consumption Over the Life Cycle: Some Facts from Consumer Expenditure Survey Data

60 Pages Posted: 2 Dec 2002

See all articles by Jesús Fernández-Villaverde

Jesús Fernández-Villaverde

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER)

Dirk Krueger

University of Pennsylvania - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: November 20, 2002

Abstract

This paper uses a seminonparametric model and Consumer Expenditure Survey data to estimate life cycle profiles of consumption, controlling for demographics, cohort and time effects. In addition to documenting profiles for total and nondurable consumption, we devote special attention to the age expenditure pattern for consumer durables. We find hump-shaped paths over the life cycle for total, for nondurable and for durable expenditures. Changes in household size account for roughly half of these humps. The other half remains unaccounted for by the standard complete markets life cycle model. Our results imply that households do not smooth consumption over their lifetimes. This is especially true for services from consumer durables. Bootstrap simulations suggest that our empirical estimates are tight and sensitivity analysis indicates that the computed profiles are robust to a large number of different specifications.

Keywords: Consumption, Life Cycle Profiles, Durables, Nonparametric Estimation, Bootstrap, Partially Linear Models

JEL Classification: D12, D91, E21, C14, J10

Suggested Citation

Fernández-Villaverde, Jesús and Krueger, Dirk, Consumption Over the Life Cycle: Some Facts from Consumer Expenditure Survey Data (November 20, 2002). PIER Working Paper No. 02-044. Available at SSRN: https://ssrn.com/abstract=354620 or http://dx.doi.org/10.2139/ssrn.354620

Jesús Fernández-Villaverde (Contact Author)

University of Pennsylvania - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Dirk Krueger

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
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Philadelphia, PA 19104-6297
United States
215-898-6691 (Phone)
215-573-2057 (Fax)

HOME PAGE: http://www.econ.upenn.edu/~dkrueger/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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