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Time variation in lifecycle consumption and income

Author

Listed:
  • Yunus Aksoy

    (Birkbeck, University of London)

  • Henrique S. Basso

    (Banco de España)

  • Carolyn St Aubyn

    (Birkbeck, University of London)

Abstract

We document systematic and signicant time variation in US lifecycle nondurable consumption profiles. Consumption profiles have consistently become flatter: intergenerational differences in consumption across age groups have decreased over time. Pooling data across different periods to identify lifecycle profiles and failing to account for unobserved heterogeneity masks relevant time variations and may articially generate hump-shaped consumption age profiles. The main driver behind lifecycle consumption variations are lifecycle income changes, which display similar flattening. Employing a lifecycle model we show changes in income are sufficient to match the movements in consumption.

Suggested Citation

  • Yunus Aksoy & Henrique S. Basso & Carolyn St Aubyn, 2021. "Time variation in lifecycle consumption and income," Working Papers 2111, Banco de España.
    • Handle: RePEc:bde:wpaper:2111
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    More about this item

    Keywords

    age profile of consumption; age profile of income; cohort effects; consumption heterogeneity; time variation; pooling;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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