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Consumption and Children

Author

Listed:
  • Martin Browning

    (Department of Economics, University of Oxford, and CAM)

  • Mette Ejrnæs

    (Department of Economics, University of Copenhagen, and CAM)

Abstract

Consumption by couples rises sharply in the beginning and falls later in life; the causes of the early rise are hotly contested. Among the suggestions are rule of thumb behavior, demographics, liquidity constraints, the precautionary motive, and nonseparabilities between consumption and labor supply. We develop two tests of the extreme hypothesis that only changes in family structure matter. We estimate effects of the numbers and ages of children on consumption. These estimates allow us to rationalize all of the increase in consumption without recourse to any of the causal mechanisms. Our estimates can be interpreted either as giving upper bounds on the effects of children or as evidence that the other causes are not important. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Martin Browning & Mette Ejrnæs, 2009. "Consumption and Children," The Review of Economics and Statistics, MIT Press, vol. 91(1), pages 93-111, February.
    • Handle: RePEc:tpr:restat:v:91:y:2009:i:1:p:93-111
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    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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