A Leisurely Reading of the Life Cycle Consumption Data
FRB of St. Louis Working Paper No. 2003-017E
26 Pages Posted: 23 Jul 2006
There are 2 versions of this paper
A Leisurely Reading of the Life Cycle Consumption Data
A Leisurely Reading of the Life Cycle Consumption Data
Date Written: July 2006
Abstract
A puzzle in consumption theory is the observation of a hump in age-consumption profiles. We study a general equilibrium life-cycle economy with capital in which households include both consumption and leisure in their period utility function. We calibrate the model and find that a significant hump in life-cycle consumption is a feature of the equilibrium. Thus inclusion of leisure in household preferences may provide part of the explanation of observed life-cycle consumption humps.
Keywords: Life-cycle consumption and saving, overlapping generations, consumption humps
JEL Classification: D91, E21
Suggested Citation: Suggested Citation
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