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

Louisiana State University, Baton Rouge

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). Available at SSRN: https://ssrn.com/abstract=897802 or http://dx.doi.org/10.2139/ssrn.897802

Fang Yang (Contact Author)

Louisiana State University, Baton Rouge ( email )

Baton Rouge, LA 70803
United States

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

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
4
Abstract Views
124
PlumX Metrics