IDEAS home Printed from https://ideas.repec.org/p/ewp/wpaper/436web.html
   My bibliography  Save this paper

Lifecycle consumption and household structure: A pseudo-panel approach

Author

Listed:
  • Gemma Abio

    (Universitat de Barcelona and BEAT)

  • Ció Patxot

    (Universitat de Barcelona and BEAT)

  • Alexandrina Stoyanova

    (Universitat de Barcelona and BEAT)

  • Raquel Andrés

    (Universitat de Barcelona)

  • Guadalupe Souto

    (Universitat Autonoma de Barcelona)

Abstract

This paper aims to identify empirically how household structure and other socioeconomic characteristics affect the lifecycle consumption profile, exploiting data available for Spain for the last 15 years. Given the nature of the data, we build a pseudo-panel of cross-sections. After reviewing the previous literature, adjusting cohort averages to timeinvariant and time-variant household characteristics, we propose employing the multilevel modelling approach WBRE (Within-Between Random Effects model). Results confirm the relevance of income as a predictor of household consumption while unveiling some interesting insights. Woman-headed households have a higher consumption profile than their man-headed counterparts after controlling for income. We observe a negative effect for number of toddlers when this characteristic is considered as a lifecycle predictor, while its impact is positive when comparisons are made between cohorts. Changing status from renter to owner has a positive within effect (lifecycle predictor), while the effect of owning on consumption is negative when contextual comparisons are made.

Suggested Citation

  • Gemma Abio & Ció Patxot & Alexandrina Stoyanova & Raquel Andrés & Guadalupe Souto, 2022. "Lifecycle consumption and household structure: A pseudo-panel approach," UB School of Economics Working Papers 2022/436, University of Barcelona School of Economics.
    • Handle: RePEc:ewp:wpaper:436web
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/2445/190618
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Richard Blundell & Martin Browning & Costas Meghir, 1994. "Consumer Demand and the Life-Cycle Allocation of Household Expenditures," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(1), pages 57-80.
    2. Attanasio, Orazio P, et al, 1999. "Humps and Bumps in Lifetime Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 22-35, January.
    3. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    4. Browning, Martin & Meghir, Costas, 1991. "The Effects of Male and Female Labor Supply on Commodity Demands," Econometrica, Econometric Society, vol. 59(4), pages 925-951, July.
    5. Attanasio, Orazio P & Browning, Martin, 1995. "Consumption over the Life Cycle and over the Business Cycle," American Economic Review, American Economic Association, vol. 85(5), pages 1118-1137, December.
    6. Spielauer, Martin & Horvath, Thomas & Fink, Marian & Abio, Gemma & Souto, Guadalupe & Patxot, Ció & Istenič, Tanja, 2022. "Measuring the lifecycle impact of welfare state policies in the face of ageing," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 1-25.
    7. Richard Blundell & Frank Windmeijer, 1997. "Cluster effects and simultaneity in multilevel models," Health Economics, John Wiley & Sons, Ltd., vol. 6(4), pages 439-443, July.
    8. Richard Blundell & Luigi Pistaferri & Itay Saporta-Eksten, 2016. "Consumption Inequality and Family Labor Supply," American Economic Review, American Economic Association, vol. 106(2), pages 387-435, February.
    9. Bell, Andrew & Jones, Kelvyn, 2015. "Explaining Fixed Effects: Random Effects Modeling of Time-Series Cross-Sectional and Panel Data," Political Science Research and Methods, Cambridge University Press, vol. 3(1), pages 133-153, January.
    10. van de Ven, Justin, 2017. "SIDD: An adaptable framework for analysing the distributional implications of policy alternatives where savings and employment decisions matter," Economic Modelling, Elsevier, vol. 63(C), pages 161-174.
    11. Rob Alessie & Joppe Ree, 2009. "Explaining The Hump In Life Cycle Consumption profiles," De Economist, Springer, vol. 157(1), pages 107-120, March.
    12. Orazio P. Attanasio & Martin Browning, 1994. "Testing the life cycle model consumption: what can we learn from micro and macro data?," Investigaciones Economicas, Fundación SEPI, vol. 18(3), pages 433-463, September.
    13. Pierre-Olivier Gourinchas & Jonathan A. Parker, 2002. "Consumption Over the Life Cycle," Econometrica, Econometric Society, vol. 70(1), pages 47-89, January.
    14. Raquel Carrasco & José M. Labeaga & J. David López-Salido, 2005. "Consumption and Habits: Evidence from Panel Data," Economic Journal, Royal Economic Society, vol. 115(500), pages 144-165, January.
    15. Deaton, Angus, 1985. "Panel data from time series of cross-sections," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 109-126.
    16. Nigel Rice & Andrew Jones, 1997. "Multilevel models and health economics," Health Economics, John Wiley & Sons, Ltd., vol. 6(6), pages 561-575, November.
    17. Bullard, James & Feigenbaum, James, 2007. "A leisurely reading of the life-cycle consumption data," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2305-2320, November.
    18. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    19. Browning, Martin & Deaton, Angus & Irish, Margaret, 1985. "A Profitable Approach to Labor Supply and Commodity Demands over the Life-Cycle," Econometrica, Econometric Society, vol. 53(3), pages 503-543, May.
    20. Joaquín Alegre Martín & Llorenç Pou Garcias, 2008. "El consumo y la tasa de ahorro privados de los hogares españoles: una descomposición de los efectos edad y cohorte," Investigaciones Economicas, Fundación SEPI, vol. 32(1), pages 87-121, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jesus Fernández-Villaverde & Dirk Krueger, 2007. "Consumption over the Life Cycle: Facts from Consumer Expenditure Survey Data," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 552-565, August.
    2. Bram De Rock & Bart Capéau, 2015. "The implications of household size and children for life-cycle saving," Working Paper Research 286, National Bank of Belgium.
    3. Thomas H. Jørgensen, 2016. "Euler equation estimation: Children and credit constraints," Quantitative Economics, Econometric Society, vol. 7(3), pages 935-968, November.
    4. 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.
    5. Caliendo, Frank & Aadland, David, 2007. "Short-term planning and the life-cycle consumption puzzle," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1392-1415, April.
    6. Kevin X.D. Huang & Frank Caliendo, 2007. "Rationalizing Seven Consumption-Saving Puzzles in a Unified Framework," Vanderbilt University Department of Economics Working Papers 0716, Vanderbilt University Department of Economics.
    7. Caliendo, Frank & Huang, Kevin X.D., 2008. "Overconfidence and consumption over the life cycle," Journal of Macroeconomics, Elsevier, vol. 30(4), pages 1347-1369, December.
    8. Attanasio, Orazio P & Weber, Guglielmo, 1995. "Is Consumption Growth Consistent with Intertemporal Optimization? Evidence from the Consumer Expenditure Survey," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1121-1157, December.
    9. Orazio P. Attanasio & Hamish Low, 2004. "Estimating Euler Equations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(2), pages 405-435, April.
    10. Thomas H. Jørgensen, 2014. "Life-Cycle Consumption and Children," CAM Working Papers 2014_02, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
    11. Francesca Parodi, 2023. "Taxation of Consumption and Labor Income: A Quantitative Approach," American Economic Journal: Macroeconomics, American Economic Association, vol. 15(4), pages 177-216, October.
    12. Martin Browning & Thomas F. Crossley, 2001. "The Life-Cycle Model of Consumption and Saving," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 3-22, Summer.
    13. Shin-Ichi Nishiyama, 2011. "The Cross-Euler Equation Approach to testing for the Liquidity Constraint: Evidence from Macro and Micro Data," TERG Discussion Papers 273, Graduate School of Economics and Management, Tohoku University.
    14. Thomas H. Jørgensen, 2017. "Life-Cycle Consumption and Children: Evidence from a Structural Estimation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 79(5), pages 717-746, October.
    15. Antonio Cutanda & José M. Labeaga & Juan A. Sanchis-Llopis, 2020. "Aggregation biases in empirical Euler consumption equations: evidence from Spanish data," Empirical Economics, Springer, vol. 58(3), pages 957-977, March.
    16. Agnes Kovacs & Hamish Low & Patrick Moran, 2021. "Estimating Temptation And Commitment Over The Life Cycle," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 62(1), pages 101-139, February.
    17. Frank Caliendo & Kevin X. D. Huang, 2007. "Overconfidence in financial markets and consumption over the life cycle," Working Papers 07-3, Federal Reserve Bank of Philadelphia.
    18. Aydilek, Asiye, 2016. "The allocation of time and puzzling profiles of the elderly," Economic Modelling, Elsevier, vol. 53(C), pages 515-526.
    19. Yunus Aksoy & Henrique S. Basso & Carolyn St Aubyn, 2019. "Time Variation in Lifecycle Consumption and Income," BCAM Working Papers 1904, Birkbeck Centre for Applied Macroeconomics.
    20. Julian Thimme, 2017. "Intertemporal Substitution In Consumption: A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 31(1), pages 226-257, February.

    More about this item

    Keywords

    Consumption; lifecycle; age; socioeconomic status.;
    All these keywords.

    JEL classification:

    • C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • 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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ewp:wpaper:436web. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: University of Barcelona School of Economics (email available below). General contact details of provider: https://edirc.repec.org/data/feubaes.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.