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Children and Life-Cycle Consumption

Author

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  • Charles Grant

    (Department of Economics and Finance, Brunel University, London UB8 3PN, UK)

Abstract

This paper investigates the role of children in explaining the life-cycle pattern of consumption (which is hump-shaped since it is higher in the middle of life and lower at the beginning and end of life). Unlike previous studies, a true panel of U.K. households was exploited to investigate whether currently childless households that anticipate having children behave differently from similar households that do not anticipate children. Spending for each group at different ages was estimated using a simple kernel regression. The paper finds that those households that anticipate children, when compared to households that do not anticipate children, do not seem to significantly reduce total spending before having children, nor do they significantly increase total spending after children arrive. Hence, children do not seem to fully explain the hump shape of consumption over the life-cycle.

Suggested Citation

  • Charles Grant, 2022. "Children and Life-Cycle Consumption," JRFM, MDPI, vol. 15(2), pages 1-28, January.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:2:p:42-:d:727944
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    References listed on IDEAS

    as
    1. Banks, James & Blundell, Richard & Tanner, Sarah, 1998. "Is There a Retirement-Savings Puzzle?," American Economic Review, American Economic Association, vol. 88(4), pages 769-788, September.
    2. Thurow, Lester C, 1969. "The Optimum Lifetime Distribution of Consumption Expenditures," American Economic Review, American Economic Association, vol. 59(3), pages 324-330, June.
    3. Fernández-Villaverde, Jesús & Krueger, Dirk, 2011. "Consumption And Saving Over The Life Cycle: How Important Are Consumer Durables?," Macroeconomic Dynamics, Cambridge University Press, vol. 15(5), pages 725-770, November.
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    Keywords

    life-cycle consumption; children;

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