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Deconstructing Life Cycle Expenditure

Author(s): Aguiar, Mark A.; Hurst, Erik

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Abstract: We revisit two well-known facts regarding life cycle expenditures: the “hump”-shaped profile of nondurable expenditures and the increase in cross-household consumption inequality. We document that the behavior of total nondurables masks surprising heterogeneity in the life cycle profile of individual consumption subcomponents. We provide evidence that the categories driving life cycle consumption either are inputs into market work or are amenable to home production. Using a quantitative model, we document that the disaggregated life cycle consumption profiles imply a level of uninsurable permanent income risk that is substantially lower than that implied by a model using a composite consumption good.
Publication Date: Jun-2013
Citation: Aguiar, Mark A., Hurst, Erik. (2013). Deconstructing Life Cycle Expenditure. Journal of Political Economy, 121 (3), 437 - 492. doi:10.1086/670740
DOI: doi:10.1086/670740
ISSN: 0022-3808
EISSN: 1537-534X
Pages: 437 - 492
Type of Material: Journal Article
Journal/Proceeding Title: Journal of Political Economy
Version: Final published version. Article is made available in OAR by the publisher's permission or policy.

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