Consumption and time use over the life cycle

Michael Dotsey, Wenli Li and Fang Yang

No 10-37, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: The authors incorporate home production in a dynamic general equilibrium model of consumption and saving with illiquid housing and a collateralized borrowing constraint. They show that the model is capable of explaining life-cycle patterns of households' time use and consumption of different categories. Specifically, households' market hours and home hours are fairly stable early in the life cycle. Market hours start to decline sharply at age 50, while home hours begin to increase at age 55. Households' consumption of the market good, home input, and housing services all exhibit hump shapes over the life cycle, with the market good having the most pronounced hump, followed by the home input, and then housing services. A plausibly parameterized version of the authors' model predicts that the interaction of the labor efficiency profile and the availability of home production technology explain households' time use over the life cycle. The resulting income profiles, the endogenous borrowing constraint and the presence of home production account for the initial hump in all three consumption goods. The consumption profiles in the second half of the life cycle are mostly driven by the complementarity of home hours, home input, and housing in home production.

Keywords: Consumption (Economics); Production (Economic theory) (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-age, nep-dge and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
https://www.philadelphiafed.org/-/media/frbp/asset ... ers/2010/wp10-37.pdf (application/pdf)

Related works:
Journal Article: CONSUMPTION AND TIME USE OVER THE LIFE CYCLE (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpwp:10-37

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Philadelphia Contact information at EDIRC.
Bibliographic data for series maintained by Beth Paul ().