A Leisurely Reading of the Life Cycle Consumption Data

FRB of St. Louis Working Paper No. 2003-017E

26 Pages Posted: 23 Jul 2006

See all articles by James Bullard

James Bullard

Federal Reserve Banks - Federal Reserve Bank of St. Louis

James Feigenbaum

University of Pittsburgh

Multiple version iconThere are 2 versions of this paper

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

Bullard, James and Feigenbaum, James, A Leisurely Reading of the Life Cycle Consumption Data (July 2006). FRB of St. Louis Working Paper No. 2003-017E, Available at SSRN: https://ssrn.com/abstract=918126 or http://dx.doi.org/10.2139/ssrn.918126

James Bullard (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

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James Feigenbaum

University of Pittsburgh ( email )

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