Life-Cycle Consumption and Children

Thomas Jørgensen

CAM Working Papers from University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics

Abstract: I show that conventional estimators based on the consumption Euler equation, extensively used in studies of intertemporal consumption behavior, produce inconsistent estimates of the effect of children on consumption if potentially binding credit constraints are ignored. As a more constructive contribution, I supply a tractable approach to obtaining bounds on the effect of children and a structural estimation strategy when households face constraints. Finally, I estimate the effect of children on consumption using the Panel Study of Income Dynamics (PSID) for the US and high quality Danish administrative register data. Results suggest that children does not affect household consumption in the same magnitude previously assumed.

Keywords: Consumption; Children; Life Cycle; Credit Constraints; Structural Estimation (search for similar items in EconPapers)
JEL-codes: D12 D14 D91 E21 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2014-01-21
New Economics Papers: this item is included in nep-dem and nep-mac
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Life-Cycle Consumption and Children: Evidence from a Structural Estimation (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuieca:2014_02

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