Revisiting the Effect of Household Size on Consumption Over the Life-Cycle

Bick, Alexander and Choi, Sekyu (2012): Revisiting the Effect of Household Size on Consumption Over the Life-Cycle.

Abstract

Although the link between household size and consumption has a strong empirical support, there is no consistent way in which demographics are dealt with in standard life-cycle models. We study the relationship between the predictions of the Single Agent model (the standard in the literature) versus a simple model extension where deterministic changes in household size and composition affect optimal consumption decisions. We provide theoretical results comparing both approaches and quantify the differences in predictions across models.

• Item Type: MPRA Paper
• Language: English
• Keywords: Consumption; Life-Cycle Models
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis; J - Labor and Demographic Economics > J1 - Demographic Economics > J10 - General; D - Microeconomics > D9 - Intertemporal Choice > D91 - Intertemporal Household Choice ; Life Cycle Models and Saving; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth

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