Consumption along the life cycle: how different is housing?

Fang Yang

No 635, Working Papers from Federal Reserve Bank of Minneapolis

Abstract: Micro data over the life cycle shows two different patterns of consumption of housing and non-housing goods: the consumption profile of non-housing goods is hump-shaped while the consumption profile for housing first increases monotonically and then flattens out. These patterns hold true at each consumption quartile. This paper develops a quantitative, dynamic general equilibrium model of life cycle behavior, which generates consumption profiles consistent with the observed data. Borrowing constraints are essential in explaining the accumulation of housing assets early in life, while transaction costs are crucial in generating the slow downsizing of the housing assets later in life. The bequest motives play a role in determining total life time wealth, but not the housing profile.

Keywords: Consumption; (Economics) (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-bec, nep-dge and nep-ure
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Citations: View citations in EconPapers (5)

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http://www.minneapolisfed.org/research/WP/WP635.pdf

Related works:
Working Paper: Consumption Along the Life Cycle: How Different is Housing? (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmwp:635

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